Management Strategies

01:37 PM
Kathy Burger
Kathy Burger
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Merger Season

In Minnesota, where I went to college, they say there are two seasons: winter and road repair. The climate feels similar in the financial services industry, where consolidation is occurring at a pace that makes one conclude there are two seasons in banking: mergers and integration, which could be considered the industry equivalent of road repair.

In Minnesota, where I went to college, they say there are two seasons: winter and road repair (the same is said about Chicago, where I grew up). The climate feels similar in the financial services industry, where consolidation is occurring at a pace that makes one conclude there are two seasons in banking: mergers and integration, which could be considered the industry equivalent of road repair. Both have become as inevitable as snow, slush and traffic delays.

The deals that have been announced in recent months have not been the industry's biggest, but they have been high-profile, including the $14.6 billion Capital One/North Fork merger, JPMorgan Chase's plan to acquire 338 Bank of New York branches, Sovereign Bank's Santander-facilitated takeover of Independence Community Bank and Trustmark's agreement to acquire Republic Bancshares of Texas.

Only time will tell which, if any, of these deals or any other M&As succeed -- not only by delivering financial returns to stockholders and management, or in terms of goals such as increasing market share and achieving operational scale and efficiency, but also in fulfilling promises about customer service, employee retention and community benefits.

Despite their inevitability, mergers continue to be extremely difficult to manage, and even those that look good from a balance sheet perspective almost always disappoint some key constituency -- if not customers, then employees who lose jobs (or status) because of integration, cost cutting or politics.

To continue the seasonal metaphors, technology's role in bank M&As is like that of snowplow drivers and salt/sand spreaders. Before the storm hits, there's a feeling of confidence and optimism. ("We're prepared, we've got enough equipment and staff, and the forecasts are for a mild winter, anyway.") When it first starts snowing, there's even a feeling of adventure, camaraderie and competitiveness. ("We're all in this together; when the going gets tough, the tough get going.")

But as the snow piles up, people grow impatient, tempers get short and all of a sudden everyone wants to know why it's taking so long to clear the roads. ("Why didn't anyone consult us before they told us what they wanted us to do, and what do they expect with the measly budgets they've given us?") It's funny how even the toughest experiences don't make peoples' memories any longer.

Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio

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