Mergers, Acquisitions, and Conversions
Operations and technology play a critical role in today's banking model. When conducting a review of a potential merger or acquisition, a thorough understanding of the operations and technology components is integral to a smooth and successful transition. It is paramount that your Due Diligence template be expanded to include the technology factors that can and will impact your investment.
They are:
- Due Diligence (expanded operations and technology review)
- Technology Analysis (Do the parts fit together)
- Integration (Threading the needle)
Due Diligence (from the production perspective)
When completing the due diligence phase it is important that you not only look at asset quality and deposit totals, you should also review all the details as they relate to the operations and technology area of the organization. A thorough due diligence report should consist of both a quantitative and systems analysis.
Technology Analysis (do the parts fit together?)
As you evaluate each potential acquisition, the questions that you should answer are:
- How old is their technology?
- What problems are associated with the technology they currently have?
- Can the potential acquisition be easily integrated into your environment?
- What major vendor contracts are in place?
Integration/Conversion Planning
What technology will be utilized? All users need to be trained on the new technology. What additional staff will be needed to support the increased volume? What is the cost to get out of current contracts? Note: if you acquire a failed institution the rules change significantly.
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