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Jun 09

3 Best Practices When It Comes to M&A of Investment Banks

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Investment banks can attain value and create sustainable profits by employing mergers & acquisitions. Globally, the choice for mergers & acquisitions is gaining more popularity. Many financial institutions and companies consider this to benefit from new tax legislation, favorable economic environment, advanced technology, and investors with moveable cash. However, undergoing M&A is a challenging process. It requires dealing with complex phases and agreements. If you’re thinking about M&A with a leading investment bank, then you should follow best-practice solutions to smooth out process:

 

Perform Due Diligence

When it comes to merger & acquisition of firms, due diligence is considered the first phase that needs to be done successfully. During the M&A project in the investment banking sector, it is equally important to conduct an in-depth analysis of the target bank. Due diligence is essential to understand the overall structure and determine the cost of the M&A process. It is performed to investigate the assets and liabilities of the target bank. This practice helps leaders recognize whether the M&A deal is worth the money and effort or not.

The process of due diligence is best-suited to learn every possible aspect of the target bank. It evaluates intellectual property, finance, human resources, ERP systems, etc. Conducting an in-depth investigation is recommended to both the parties/banks that are interested in M&A with one another. They are required to share relevant business data, confidential information, and present facts to reduce post-transactional risk. And in order to do so, it is best that investment banks use VDR M&A to share documents/files on the secured online repository and get reasonable control over the situation.

 

Focus on Detailed Planning Process

Before both parties jump into the agreement phase, it is essential to conduct detailed planning. This is needed to cover the terms and conditions of M&A. It guides you to devise policies and frame appropriate strategies. This usually includes change management, organizational design, inventory assessment, and communications.

During the planning phase, your bank can gain an understanding of another party while looking at its complementary assets, distributed business processes, and regional variability of organizational structure. It is also imperative on your end to understand how the target bank manages its massive data, like customer records, services/ products, and retail banking channels.

Based on the collected information/data, your bank needs to carefully devise a plan, design, and implement the M&A process.

 

Effectively Manage Integration

It is imperative to effectively manage the integration phase after both the parties are done performing due diligence and deciding on the terms & conditions of agreements. Investing time and effort on the integration phase is needed to take care of matters, like vendor selection, schedule visibility, improvement evaluation, and resource investment.

Integration starts with rapid change management. It demands a disciplined approach to ensure a successful transition. Investment banks can expect to face a lot of challenges, such as increased cost and more risk if they are unable to gain control of the change process.

The other steps in execution/integration are to accomplish cost reductions, reconstruct the IT set-up, seek opportunities for improvements, build contacts with trusted vendors, and reduce the footprint of the system.

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