Financial services organizations are increasingly using pre-signing integration plans to create value out of a deal and appease shareholders, investors and regulators, according to EY’s Striking the right chord: M&A integration in financial services.
- 29% of financial services companies with a pre-signing plan realized a 40% reduction in the target’s cost base through synergies
- Only 12% of respondents without a pre-signing plan achieved that same scale of cost synergy
- 70% of companies had an integration plan in place before deal signing
According to the survey of 200 asset management, bank and insurance executives, 70% of financial services organizations had a synergy and integration plan in place prior to signing, a number that rose to 93% with deals of US$1b or more in value.
Go deeper with GlobalData
Access deeper industry intelligence
Experience unmatched clarity with a single platform that combines unique data, AI, and human expertise.
More than two-thirds (69%) of acquirers included resources from the target company as part of the integration program, and slightly more than half (52%) of all companies said more resources could improve future integrations. This survey was conducted by Remark, the market research division of The Mergermarket Group, on behalf of EY.
Michael Wada, Associate Partner, London, EY EMEIA Financial Services and Transaction Advisory Services, says:
"Coming out of the financial crisis, we now see strategic M&A returning to the agenda of financial services companies. But increasing scrutiny from shareholders, investors and regulators mean that organizations will have to plan integrations carefully to ensure deals create value."
The survey outlines five key practices that financial services companies should follow to achieve success:
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalData- Have a synergy and integration plan before signing. Organizations are no longer waiting to complete due diligence before thinking about how the deal will create value. The survey found that 29% of respondents that had a pre-signing plan realized a 40% reduction in the target’s cost base through synergies, while only 12% of respondents without a pre-signing plan achieved that scale of cost synergy. In addition, regulators are beginning to ask to review plans as part of their approval process.
- Ensure the right resources are in place. Companies need to secure, retain and motivate the right number and quality of resources from across both organizations to successfully plan and deliver integration. According to the survey, 59% of respondents who concluded deals of more than US$1b had dedicated integration teams of more than 50 people. An integration director with a wide range of skills and experience should lead the effort, though there tend to be few qualified candidates freely available.
- Clearly define and track deal value drivers. Well-planned synergies influence the purchase price and help focus post-deal investment in the right areas. More than half (55%) of companies say that funding, capital or tax efficiencies are the most important factors in creating value.
- Prioritize and measure integration progress. Organizations need to set clear deal-specific priorities to shape the focus of integration activities before closing and then during the first 100 days after signing. Close to a quarter (24%) of respondents identified operations as the most important area to consider in Day One and 100-day planning phases, while 22% identified legal, risk and compliance, and 17% identified finance, treasury and tax as the most important. Front-office functions often were considered later in the process.
- Focus on the cross-functional activities. Human resources and information technology touch every aspect of integration, becoming either key enablers or key constraints. Identifying how to bring the IT applications and infrastructure of two organizations into a common architecture was cited as the biggest challenge by 27% of respondents and was the top issue among asset managers, banks and insurers. Twenty-one percent of respondents identified retaining key talent as the most challenging aspect of HR integration, a number that was greater (28%) among asset managers, possibly reflecting the typical concentration of client relationships and investment expertise in a small group of front-office staff.
