Three technology questions the wealth management industry should ask in mergers and acquisitions (M&A) deals.
Merging success: Evaluating technology within M&A strategies
Companies have traditionally used M&A to grow within existing markets, but today, firms are also using it as an opportunity to diversify and modernize. Technology drivers—such as technological advances, digitization, and new generations of customers and colleagues—can also be the areas where we see the greatest change friction.
Here are three key questions and challenges to think about when considering technology in M&A.
It’s imperative that the two parties consider their unique technology systems and crucially develop an integrated system where some fundamental questions will need to be asked and answered before tackling timelines.
Early on in the discussion, companies will want to explore a variety of questions, such as:
The approach to these answers, broadly speaking, can be seen through the lens of whether or not two or more unique brands will continue as separate entities or whether the deal has been executed with an eye towards future revenue growth.
Moreover, a merger or acquisition can serve as a natural impetus to finally leave legacy systems behind and adopt a modern technology infrastructure. As these questions are being answered, the timeline for the deal and its budget will be key factors in determining the outcome of these questions and the way in which systems are integrated.
Managing the integration of distinct technology ecosystems can be a serious challenge. If not handled properly, the integration can erode the value of the original deal. Getting buy-in from senior leadership, setting up a framework, and having good governance will help mitigate risks of a flawed execution.
Critically, it can be time and resource intensive. It’s important to assess honestly if you and your team have the right structure in place—including internal and external resources—to accommodate the roles and responsibilities necessary to integrate systems while continuing business as usual.
A significant part of the success of any M&A deal rests on pre-deal due diligence. It is here that both organizations must ask the critical questions necessary to make the deal a success. Consider questions, such as:
Creating a pre-deal due diligence checklist that answers these questions will help determine what sort of technology is needed and best fits the needs of the overall strategy, including reporting obligations and regulatory standards.
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