Accenture Do You Know? Competition Case Study 1

Managing a Merger for a Regional Bank

Background
ABC Group is the fifth largest financial services provider in Southeast Asia by total assets, with a vision to be "Southeast Asia's most valued universal bank". It offers consumer banking, investment banking, Islamic banking, asset management and insurance products and services. Its key regional offices are located in Malaysia, Singapore, Indonesia and Thailand.

ABC Group acquired two banks in Indonesia: Bank X and Bank Y. In term of assets, Bank X was the sixth largest bank in Indonesia whereas Bank Y was the tenth. To comply with the Indonesia Central Bank's "single presence policy", ABC embarked on a plan to merge these two banks. The merger would create the fifth largest bank (ABC XY Bank) by total assets of more than USD 10 billion and also among the top five in terms of distribution network in Indonesia.
Challenges
Due to the nature of the banking business, two of the most important aspects of a bank merger is managing its people and the IT and operations merger integration.

The speed of completing the merger depends on the speed of the IT & Operations integration, whereas true "one-bank" service happens only upon completion of the IT & operations integration. The IT & Operations integration timeline will also drive the timeline for most other activities.

The two legacy banks posed several unique challenges that had to be addressed:

* The two legacy banks have similar size customers and transactions that would make the combined banks operate with double the volume.
* Bank X and Y are strong players in their respective market segments. Bank X is a strong corporate market player whereas Bank Y tends to focus more on the consumer and commercial markets.
* The two banks have huge customers base, 3.3 Million customers in total.
* Geographic spread (more than 650 branches, 1267 Automated Teller Machines (ATM), 237 Self Service Terminals (SST) located in across country)
* Distributed and decentralized systems in the two banks (more than 100 applications need to be aligned and integrated or rationalized)
* Need to retain and integrate two different legacy systems for credit card business alignment - Bank Y's merchant acquiring system and Bank X's card issuing system
* Different network architectures (hub & spoke vs. star topology)
* Selection of talented employees to continue the management and operations and how employees would work in a new environment

ABC needed to quickly integrate its new acquisition to realize merger synergies (both cost and revenue) and carry out the merger integration exercise without destroying any value or losing key customers. This process involved the integration of business units, operations and IT of both banks.

Question 1
You are leading the Accenture team to develop the IT Strategy for the integration services for the merger of the two banks. Using Accenture's proven "Merger Integration Framework and Methodology" what steps and what areas will you prioritize to ensure that the strategy fits with the overall goals?

To help you in making a decision, here is Accenture's Merger Integration Framework and Methodology:

My Answer
The first step is taking part in due diligence process [2]. IT planning and strategy as part of due diligence process to merger Bank X and Bank Y should be addressed since that until executing integration plans. Why? Because during the process, IT is needed not only in keeping the current business’s operation running of this two but also supporting the process of integration itself. According to Accenture research, IT plays central role in delivering business synergy on this merge thing [2]. Moreover, because with their services, huge customer base, geographic spread, 100 applications to rationalize as describe above, not much to tell that the nature of business process of this two banks quite depends on the use of IT. So, early start can help reduce the IT risk on completing the integration. From [1][2][4] can be concluded that it's necessary to begin working as early as possible since initial due diligence process prioritize on this following areas:

1. Combining IT organization and mobilize the team
Combining IT organization [1] in one management should be done as soon as possible, not only reconstruct the infrastructure (different network architecture, data center) but also organize people from both two IT organizations. Some of them then required to join integration's team and execute projects needed to integrate and achieve synergy.
In mobilize the team [2], it’s important to choose the right IT project integration leader, also the leaders and members of each functional team. Functional teams include:
o team for each business application areas
o team for review infrastructure, vendor, and contract management
o team for organization and operating models
Each team is responsible for making decisions, creating synergy estimates, developing implementation plans, indentifying resource needs [2] which will be the output of conduct integration planning phase.

2. Create and share guiding principles
With the creation of post-merger guiding principles, it would give such a target and direction, also help on making decision. For this case, it can address integration goals on how to support the Bank ABC XY for day one it run, subsequent 30/60/90-day milestones, and others [2].

3. Build a fact base
- Consist of current infrastructure, applications, budget, and other details that important.
- In this case this two banks have different market, branches, ATM, SSL, credit card business alignments, and network architecture to consider.
- In IT due diligence process actually it should already start the process of integrating data between Bank X and Bank Y. It can be achieved by what is so called third party conduct a clean room mechanism. Definition of this mechanism from Accenture is not only mechanism which third-party could examine sensitive information but also allows detailed, side-by-side analysis and integration planning before approval are finalized [3], which is happen in establish merger framework phase.

4. Identify the most likely targets for IT synergies
- Look for area where can capture both short and long term synergy [2]
- Current projects on-going
Evaluate existing projects and prioritize projects for integration.
- IT investment
After review all hardware, software license and contract of this two, decide what is needed to keep on Bank ABC XY.
- Applications
In my opinion, it would be good to choose which is best to implement according to the functionality, market service, and credit card business alignment from each applications of this two. For example: combine Bank Y's merchant acquiring system and Bank X's card issuing system or for corporate market, we can use system from Bank Y, vice versa. And noted, as in transition progress, it's also important to ensure two systems to keep running to support business operation of this two banks until transition completed [1].

5. pick your likely “big five” projects
Even we should prioritize in integration project, it’s also necessary to prioritize on project which is related on business-critical function that enabled by IT in such areas like branding, operations footprint, customer-facing processes, financial policy harmonization, major real estate moves or consolidations [2].

That’s all that need to prioritize to ensure the strategy fit with the overall goals of this integration.


[1]Myers, B., “Understanding and Migrating IT in a Merger Integration Project”, 2010.
[2] Accenture, “Getting Ahead of the M&A Curve to Drive High Performance”, 2009.
[3] Chanmugan, R., Shill, W., Mann, D., Ficery, K., Pursche, B., “The intelligent clean room: ensuring value capture in mergers and acquisitions”, 2005.
[4] Accenture, “The heureka! Project Post-Merger Integration Bank Austria/Creditanstalt”, 2001.