The winner of last month's "Now you tell me!" award was Charles Prince, Citigroup's recently named CEO, who stated in a presentation about the institution's global corporate and investment bank, "The era of the transformational merger is over."
Although he was discussing future Citigroup strategy, claiming that the bank is "too big to be transformed any more [and is] focused on growing organic revenues," his comments presumably were also aimed, at least subconsciously, at Kenneth Lewis, CEO of Bank of America. As the banking world knows, Lewis, who in recent years also pledged allegiance to the concept of organic growth, last month revealed plans for what will be, if not the mother of all banking mergers, certainly the deal that signals M&As have regained popularity.
But whether deals such as the Bank of America/FleetBoston merger are popular with anyone besides the executives who put them together remains to be seen. Although Wall Street has been speculating for months about a Fleet takeover, the market's general reaction to the announcement was negative (at least as far as BofA's stock was concerned). The reaction of consumers and employees seems to be one of, "Here we go again." Most striking to me has been the lukewarm, at best, response of industry-specific analysts, especially those from organizations such as TowerGroup, Celent, etc., who understand technology's role in banking. The track record of both of the merger participants is mixed when it comes to successfully managing the technology aspects of past M&As-as it is with virtually any institution that has been involved in a merger.
There are a lot of reasons for this-the least of which is technology. Egos, politics, money, regulation-and did I say egos?-can all foil even the best technology strategy. It's ironic that even though business/technology alignment remains more concept than reality at many financial institutions, at merger time IT suddenly becomes the driver, the quick fix, the source of all benefits, and more. It will be easy to automate, consolidate, streamline and upgrade. Or so it says in the press release.
One doesn't want to resort to self-fulfilling prophecies, but clearly achieving one of the anticipated goals of the BofA/Fleet deal-saving $1.1 billion in operating costs, redundant technologies and simplified processes-is going to be a challenge, to put it mildly. This is a transformational merger, all right, but what is going to be transformed remains to be seen.