Rethinking private banking in Asia-Pacific
How to extract value post-merger
Preventing M&A deals from destroying shareholder value over time is notoriously difficult. Market and academic research regularly cites 50–75% of transactions as failing to achieve their objectives. Based on EY’s recent experience, successfully integrating wealth management businesses requires a number of factors, including:
- Alignment of the investment proposition. The target may have fundamental differences in its investment universe, investment horizon and investment philosophy. Executives need a clear view on how the different propositions will fit together, as this will impact the sales process, client suitability process and marketing collateral.
- Selection of the right platform. Involve platform providers early in integration planning, as they will need to manage the platform migration alongside their existing change agendas and other client commitments.
- Careful management of bespoke client services. Bespoke services are often difficult to replicate. Buyers should aim to understand the level of customization during pre-deal due diligence. Management should be prepared to make difficult choices between client retention and absorbing operational complexity, which could burden the business for years to come.
- Creation of a consistent distribution model. End investors and intermediaries may have previously received differing levels of service and interaction with the buyer and acquired business. Executives need to decide how to create a consistent distribution and service model across the combined business.
- Retention of key employees. This issue is particularly acute in private banks where client relationships and investment expertise may be concentrated in a small number of individuals. Even where the transaction is not a “merger of equals,” involving key employees in the integration planning process can significantly improve retention rates.