Mergers, acquisitions and the crisis

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The world economy is the worst it’s been for quite sometime. After years of sustained growth businesses are beginning to come to terms with the impact of the ‘credit crunch’ and the decline in revenue. As a result the press has been buzzing with acquisition and merger news not least of all Lloyds TSB and HBOS.

In a downturn, M&As are sometimes more of a necessity than part of a long term business strategy. The bedding down period for mergers or acquisitions always represents a crucial time for companies and this is amplified even more during economically turbulent periods.

Trying to align systems in-house after a merger or acquisition can be problematic, particularly if parties fail to agree on the best system to go with and arrive at the sort of political stalemate that leads to good elements from both systems being thrown away. When organisations grow by successive acquisition, the pace of change frequently leaves a legacy of systems that do much the same thing but don’t interconnect and in this case both banks are the result of previous mergers.

Lloyds TSB will almost certainly start to cut down processes and people, which they see as being surplus to their needs. Management teams often find it harder to consolidate and summarise everything that is going on, leading to duplication of costs, which makes it harder to flush out risks, which of course was a major factor in this merger, and increases the chance that there will be a failure of internal controls.

Even though Lloyds TSB is a seasoned outsourcer and has an excellent reputation in this area; industry analysts will be looking for the results to produce the expected gains. As if this is not done well the result could be a reduction in profits, share price and brand value, something which could be devastating to the new group and of course for the government whose action prompted it!

In this economic climate more high profile deals such as this will end up on the front pages of the press. Lloyd’s TSB has processes to handle this but others may not be in such an advantageous position. One way in which the strain in the wake of such mergers or acquisitions can be reduced is by bringing in a strategic Business Process Outsourcing (BPO) partner. This partner can arrange for the standardisation of the business processes, handled the change management and delivering the desired service to the agreed KPIs.

When all eyes are focused on the financial services market it is imperative that deals such as Lloyds TSB and HBOS are carried out as efficiently as possible.

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