Post Merger Integration in Financial Services

After the recent macroeconomic headwinds for M&A activity in Financial Services (Brazil and worldwide) driven by higher interest rates, risk aversion and capital allocation priorities, it is expected that at some point the inorganic growth will get more attention. 

Regardless of the strategic rationale that motivates inorganic transactions, there is one thing that most companies use and still fail – the Post–Merger Integration (PMI). By failing in this process, companies jeopardize the returns estimated during the pre-deal discussions. 

Except in cases where the integration is not a prerequisite (the acquired company core activities and position are different or complementary), shareholders expect that by joining forces, companies will be able to combine the “best of both” in products, services, teams or technologies, and capture synergies benefits (costs and revenues). However, in most cases, the expected gains are not captured over time, diminishing the value creation to shareholders. 


Why do integration fail? 

The complexity level of integrating a company is a key variable to determining the go-ahead decision, and this evaluation should be initiated as soon as the transaction speeds up.  

A couple of challenges that companies face in this process: 

1. Most deals are confidential and not all areas are involved during the target evaluation.  

2. Not all risks and integration complexity are identified during the evaluation. 

3. Synergies are not properly quantified and converted into tangible actions and deadlines. 

4. Often the PMI initiatives conflict with daily activities, priorities, and goals.  

5. It is not clear who is “the owner”. 

6. Gaps in terms of culture and values. 

7. Forget to map potential dyssynergies. 

Therefore, the return of the investment can be canceled by delays in capturing synergies, higher integration costs (IT, infrastructure, team), deviation of attention from the core activities, among others. Also, as time goes by, most companies tend to neglect the PMI tracking. 

Companies should mitigate risks and potentialize value creation by incorporating the PMI responsibility as part of their M&A core functions, with specific goals and objectives.  


Actionable Recommendations 

We selected a couple of actions that will bring tangible results for organizations during the planning and implementation of a PMI program: 

1. Define the new organization structure (to be) and governance as soon as possible. 

2. Execute wisely a communication plan for clients, partners, suppliers, and employees. 

3. Combine policies and procedures (HR, training, salaries).

4. Identify, detail, and calculate each synergy, during the preparation phase, segmented by area (see below), and converting them into a project: 

– Marketing (branding, communication, social media, PR, e-commerce) 
– HR 
– Commercial and Channel (sales and distribution)
– Products and Technology (core banking, IT infrastructure, software development)
– Back-office functions
– Finance
– Operations  

5. Incorporate the execution of synergies as part of the strategic plan, employee’s balanced scorecard and compensation. 

6. Track each project to identify risks, bottlenecks, and progress. 

7. Continuously review the go-to-market strategy combined. 


We know that the ability to launch products and services quickly is an edge to competing in the financial services market, as well as the ability to integrate faster with a target company or even with a partner. And to succeed, we highly recommend that managers consider the PMI in their strategic agenda and planning sessions.  


How can Compass UOL help 

Compass UOL has a set of capabilities to support your company across the PMI end-to-end journey, combining deep business and technology domain to accelerate all aspects of integration while teams are focused on their core activities. 

Our approach covers: Strategy (products, marketing, sales, and channels), Change Management, IT Integration (infrastructure, development, and innovation) and Processes. 

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