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What guides you through the storm? Early nautical explorers looked towards celestial navigation to find their way. They came to rely heavily on the Sextant for navigating the night skies. This worked well under clear skies, but new methods of navigation were required when storm clouds gathered on the horizon. What guides you through the stormy waters of M&A? Old tools and approached don’t always work. Regardless of deal complexity, setting sail without a clearly defined strategy is always a risk. Understanding your capabilities in the context of an “M&A lifestyle” model will lend much needed comfort to all those charged with executing the deal. Questions need to be asked, and answered, and approaches formulated to ensure alignment in such areas as:
- Growth strategy
- Market focus
- Management focus
- Delivery capabilities
By addressing these questions early in the M&A process and establishing a clear strategy, you will be better positioned to successfully execute an effective M&A plan.
Do you know your M&A lifestyle? <Go to M&A Services Solution>
Why didn’t we know this before? We often see institutions spending two to four times their conversion budget to finish the project. This cost (not to mention ongoing operation issues, client runoff, and negative publicity) is generally a function of poor due diligence. Granted, there are other factors that need to be acknowledged – inadequate strategy, incomplete or deficient project plans, and poor execution – but often poor due diligence is the root issue. It comes back to the question of how is it possible to deliver a complex, time sensitive effort within budget and on time if you do not have a good handle on all of the different components before embarking on the project? It is not unusual, although almost always disastrous, for banks to still be doing discovery while undertaking the final stages of testing. How can you avoid the potholes in a shifting information landscape? Not sure you can completely, but you certainly can be more prepared to deal with late breaking news that has a material impact on your planning effort. Getting at information early will certainly help the planning process, but this is an imperfect science, so be prepared to accommodate information throughout the project delivery process.
Need better insight early? <Go to M&A Services Solution>
Plan the execution, execute the plan Done wrong and it’s likely they will execute the planner! It’s tempting to rush into an M&A deal. ROI looks promising, deal price looks good. We have some idle staff, let’s get it done. Why waste time planning? Because, it is likely to be the single activity that stands between a successful M&A project and an unmitigated disaster. Other than that, who needs it! The key is in the definition of the work plan. Is it really as comprehensive as it should be? Reconstituting an MS project plan that didn’t quite work right the last time, was not updated to incorporate lessons learned, and is more of a task list than a true plan, will not work. Have you considered creating and maintaining both a limited scope (branch acquisition/data conversion) and a full-scale (full consolidation/potentially multiple, concurrent conversions) plan? It is possible for an institution to proceed confidently, with minimal customization to the plan, regardless of the makeup of the acquired entity. Just takes a little focus, and planning.
Ready to build a better plan? <Go to M&A Services Solution>
A funny thing happened on the way to the Forum…Don’t let your M&A effort turn into a farce – it can be dangerous to your health. Too often banks that assess and undertake an M&A transaction develop tunnel vision. There is no doubt that any M&A event is a big deal and requires a high level of management focus and attention. That having been said, your ongoing operation and strategy can’t afford to stop. .There are mission critical projects, customer efforts, cost savings programs, revenue enhancements and infrastructure requirements – many of which represent a material ROI impact to your business. Your ability to manage your M&A efforts in the context of your current operations and ongoing project slate will go a long way toward maintaining a competitive edge, managing costs and offering your customers new services and features.
Flexibility is not a luxury. It simply doesn’t make good business sense to carry a M&A team and/or pull limited staff off of key projects (“swat team”) in order to staff a M&A effort. Staffing models should address today’s realities – greater need for flexibility, the requirement to reduce core operating costs, a smaller margin for error, and the necessity to be nimble. In many cases the old model (rob Peter to pay Paul) simply doesn’t work in this new paradigm. As part of your M&A strategy, it is critical to identify and utilize valuable partners as a way to ingrain flexibility into your operating model. While this approach requires greater communication and coordination (governance) the benefits of being able to quickly make course corrections and leverage a broader experience base often far out-weigh the alternatives.
Interested in flexible options? <Go to M&A Services Solution>
Don’t just get bigger, get better. In today’s environment, you can’t afford to just be spending money – you have to be making investments. An M&A opportunity can be viewed in a broader context - as part of a transformational process that helps to reduce overall costs, improve infrastructure, introduce revenue opportunities, and expand flexibility. This exercise requires coordinated input and involvement from the M&A team, the lines of business, the IT group and bank operations. Tradeoffs, risks and expenditures need to be assessed and reviewed in light of the overall end game, not just the conversion effort. When planned and managed properly, the result can be a more effective conversion (and future conversion capability) and a more efficient technology environment that better supports both M&A and production. Seize the opportunity to address far reaching improvements while transforming the operations of the bank.
Feel like making a bigger impact? <Go to M&A Services Solution>
Keep your guard up.You have worked hard to set the vision, build the plan, execute flawlessly, and deliver lasting value from the M&A effort. Don’t forget the lessons learned. Embed them in the program. We have seen many frequent acquirers with plans and methodologies in place continue to make the same mistakes again and again. There are a number of tell tale signs to look for that often result in poor execution:
- Complacency – the willingness to settle for lower standards
- Management distractions – inability to effectively manage multiple efforts simultaneously
- Lack of qualified staff and/or full commitment – fragmented, inadequate, inexperienced or un-motivated/burnt-out staff
- Poor governance – too much or too little for the scope and complexity of the effort
- Reactive as opposed to pro-active mindset – a willingness to accept problems as opposed to identify creative solutions
- Unwillingness or inability to deal with change
Keep your guard up and remain diligent in your planning and execution.
Ready to capitalize on what you have learned? <Go to M&A Services Solution>
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