Excel When Opportunity Knocks

Drivers of the current M&A environment

With organic deposit growth challenges failing to support lending activities, financial institutions must seek ways to expand. Bank mergers for the first quarter of 2019 have grown 21 percent over the same quarter last year, according to a recent Bloomberg article. Favorable regulatory changes have eased the way for banks to acquire without regulatory barriers. Efficiency expectations have increased as digital banking takes further hold. The current acquisition environment suggests specialized skills and talent are needed to support complex banking consolidations.

Banks need M&A execution assistance

Acquisition execution within a financial institution creates excitement, yet it’s also a resource-challenging time. Finding both the technical and banking expertise needed with a tight labor market creates a quandary for the senior management team of the newly combined entities. The U.S. Department of Labor cites the following employment statistics:

“Unemployment rates were lower in December than a year earlier in 250 of the 388 metropolitan areas, higher in 116 areas, and unchanged in 22 areas, the U.S. Bureau of Labor Statistics reported. The national unemployment rate in December was 3.7 percent, not seasonally adjusted, down from 3.9 percent a year earlier.” In a time of both M&A opportunity and low unemployment, financial institutions’ needs for skilled human resources can become acute.

The expertise needed by banks to take advantage of merger opportunities include program leadership, quality management, solution design, banking product expertise, business process improvement, and training.

Project, program and portfolio leadership

Beyond the “nuts and bolts” of a conversion, most banks seek to enable a transformation of their people, process, and technology. These initiatives demand skilled leaders to provide firm governance to ensure bank and partner resources meet key commitments and provide the expected deliverables. These senior program and project managers should comprehend and adhere to a bank’s established governance methodology while being seasoned enough to provide sound judgement and executive communications. The following graphic summarizes the role of a program leader in driving a bank consolidation:

Quality management

Quality management within merger and consolidation activities requires skilled Quality Assurance resources with experience conducting crucial tasks such as:

• Defining testing requirements of the new integrated solutions
• Defining and establishing necessary test environments and data
• Managing test execution and reporting

While many stakeholders affect the quality of the outcome in a bank merger and consolidation, experienced and senior quality experts can provide the structure and communication needed in complex solution development.

Solution design

Replacing a core system due to a merger should not become a simple swap-over effort. To deliver substantial efficiency gains available in advanced technology platforms, innovative business processes must accompany new systems. Best practices and finely tuned staffing models can be applied to ensure the realization of maximum value, starting even before the actual conversion event.

Solution architects should collaborate with the business stakeholders in a bank to establish the business scope and requirements and then design a blueprint to realize the vision. A good solution architect understands the business and the challenges developers must address to construct a solution.

Banking product expertise

Bank mergers require effective product consolidation to realize the many operational benefits of the transaction. Deep banking product expertise becomes an invaluable asset both in pre- and post-merger activities.

In planning for the consolidation, bank executives must make many application decisions – from product analysis through product definition. Once those decisions are made, detailed mapping helps ensure a successful data conversion effort occurs. Subject experts, with deep knowledge of how banking products impact the merger perform, become invaluable. They can also help ensure findings from the Business Process Improvement effort and solution design create actionable results.

Training and education

System conversions and organizational consolidations dramatically increase the need to educate bank employees. Training becomes critical to ensure a smooth transition. Tight timelines increase the pressure on employees and managers who must make every effort to ensure staff is prepared on conversion day. Many banks have reduced their training staff, and/or they cannot scale to meet the peak training demands a merger creates.

The training can vary from general banking guidelines for new hires, to specific processes and procedures for back-office deposit operations employees. The following video provides an example of just one type of general, online training: Banking 101.

As bankers look for expertise to help realize the gains of a pending merger or acquisition, they should consider a partner with extensive experience in program leadership, quality management, solution design, and training.