Individual value of Bank X :
- sixth largest bank in Indonesia
- strong corporate market player
Individual value of Bank Y :
- tenth largest bank in Indonesia
- focus on commercial market
The two legacy banks posed several unique challenges that had to be addressed:
- The two legacy banks have similar size customers and transactions that would make the combined banks operate with double the volume.
- Bank X and Y are strong players in their respective market segments. Bank X is a strong corporate market player whereas Bank Y tends to focus more on the consumer and commercial markets.
- The two banks have huge customers base, 3.3 Million customers in total.
- Geographic spread (more than 650 branches, 1267 Automated Teller Machines (ATM), 237 Self Service Terminals (SST) located in across country)
- Distributed and decentralized systems in the two banks (more than 100 applications need to be aligned and integrated or rationalized)
- Need to retain and integrate two different legacy systems for credit card business alignment – Bank Y’s merchant acquiring system and Bank X’s card issuing system
- Different network architectures (hub & spoke vs. star topology)
- Selection of talented employees to continue the management and operations and how employees would work in a new environment
Possible synergy :
- merger would create the fifth largest bank in indonesia (ABC XY Bank), worth USD 10 billion, and also top five in terms of distribution network.
- Establishing the merger framework
- Conducting Integration Planning
- Execute The Integration Plans
In establishing merger framework, we have to comply with “single presence policy” that issued by Indonesia Central Bank. So our main idea here is to merge all consumer from both bank into a new bank with unified service, server, database, and management.
3.1.1 Directional strategy :
a. Technical aspect
When the bank combined and minimum requirements are fulfilled, we need to have one bank system which can achieved by integration of both system. To do this, we need to :
- update database of both bank to a new compromised database, to improve costumers experience in the new bank and also to unify data management, reduce cost. In this case we have to keep in mind database hardware and software capabilities, and space required in each new bank
- adapt and bring together two different background cultures. Corporate market of course different from consumer and commercial market, in this case we need to create a new service system to sum up two different market. Those system have to defined as nimble as possible to accommodate huge costumers number.
- update apparatus (branches, ATM, SST) by lining their interface, data transfer system, and costumer service, so that new bank can reap benefit from new bank’s new device. This step will also improve distributed systems in new bank.
- adapt two different network architecture by creating interface to let those networks communicate, by identifying banking process model of both bank, planning banking process conversion, and nurture the conversion process
- adapt data architecture by defining compromised data conversion, and then create a data migration. Subsequently, data definition and migration dictionary must be defined before database merger executed. Lastly, we have to test and validate new database.
- improve features in bank system architecture, such as network, hardware, and software debugging tools, migration tools, capacity & merger planning, and disaster recovery tools.
- adapt two credit card business alignment, which is Bank Y’s merchant acquiring system and Bank X’s card issuing system. Based on its’ differences, we should set a different package for those two credit card business alignment
b. People Aspect
- make management program to improve and prepare employees for the merger, by generating communication plan, arranging staffing model, and standard procedure of operations to improve people performance
- establish an IT operation aspect communication to stockholders, community, and regulators
c. Organization Aspect
- arrange a new organization model based on both bank culture on IT&operations
- management structure to define organization transition on IT&operations
3.1.2 Financial goal
Define financial goal in all sector, branch, and apparatus, including
- initial merger goals : fifth largest bank in Indonesia with assets more than USD10 billion, and also top five in distribution network
- hardware & software investment, such as server and its application.
- decommissioning of some services cost
- System Applications Products (SAP) and interface (to establish communication between different network architecture) investment.
- data network interfacing investment
- tools investment (debugging, migration, recovery, etc.)
- credit card system improvement
- management training for top level management and employees.
- SAP training for end users investment
- set financial constraint which given by stakeholders and steering committee.
3.1.3 Define top level leadership :
create a separated team to handle given before, according to discussion with senior leader, steering committee, and Project Management Office. We recommend we create a team managed by PMO :
- team to investigate hardware merger :
- ATM hardware
- branch services
- network architecture interfacing
- data structure
- SST hardware
- several apparatus update
- credit card amendment
- team to investigate software merger
- SAP, data structure
- apparatus interface (ATM,SST)
- tools software.
- team to investigate people and organization
- SAP training
- mangement training
- top level training.
3.1.4 Establish and launch communications
- Defining a detailed investigation description for each team
- Breakdown job description into a task for each person in a team
- Specify job timeline
- define stakeholders requirements
- define communication approach
3.1.5 Mobilize and launch program management
- Initiate a commencement meeting
- Deliver task to each team
- Gather more data on information needed from two bank (system architecture, data structure, geographical spread, etc.). If needed, we can use a clean room where data and analysis from both bank can be analyzed
3.1.6 Develop merger integration guiding principles
- teams defining standard and target in hardware, software, and network
- teams defining standard and target in interface
- teams defining value and target hypotheses, service required, new technology applied, network scope, outsourcing, and ongoing cost
- define merger guiding principle
3.1.7 Define merger integration organization
- defining new structure and task for new bank, especially in IT&operations
- core functions (corporate administrative services, marketing, human resource, sourcing, facilities/real estate, finance, and IT)
- operations (treasury management, deposit operations)
- service (lending, credit card, wealth management services, product management, corporate&investment)
- costumer interaction channel (branch,ATM, online banking, relationship management, call center)
- defining leader
- defining merger timeline
3.1.8 Prepare high level integration roadmap
In brief, IT&Operations merger have several integration issues :
- network interfacing
- software and SAP update
- database update
- credit card amendment
- data structure agreement
- end-service update (branch,ATM, etc.)
- end-user training
3.2 Conduct integration planning
3.2.1 develop and implement change of control priorities
- identify change in IT services authorization :
- Costumer Interaction
- Each branch administrative tools, call center, ATM must be updated : unified call centre, and ATM which work on two banks.
- New credit card system should be issued, to separate feature access from both corporate and commercial consumers.
- Maintain good communication in Relationship, especially with loyal and key costumers
- Centralized new online banking system with unified database
- Service offerings
- Update every administrative tools for lending, credit card, wealth services, product management, and corporate banking to provide one house service from both banks
- Treasury management and deposit operation which improved to serve both commercial consumer and also corporate consumer from both banks
- Core Function will be able to controlled by legitimate employees in new bank
- Corporate administratice service
- Human Resource
- Facilities/Real estate
- Information Technology
- Costumer Interaction
- keeping track on IT services control activities
3.2.2 identify early registration and business risks
- assess merger process
- does new data structure finished with standard and documentation ?
- does new hardware concur with new data structure ?
- does new credit card system able to accommodate both consumers segment needs?
- can different network architecture communicate with interface created ?
- does ATM, SST compatible with both bank ?
- does branch activities support both corporate and commercial consumer ?
- elaborate action plan
3.2.3 plan and implement synergy management
- define synergy plan that have to be achieved by both banks
- branch management
- ATM and SST compatibility to both banks
- different credit card package for corporal and commercial consumers.
- top management plan
- execute synergy management plan
3.2.4 define and implement risk management program
- identify and assess threats
- assess the vulnerability of critical assets to new network topology, credit card, hardware and software
- determine the risk
- identify ways to reduce those risks
- prioritize risk reduction
3.2.5 kick off integration team, prepare team, charter, and key decisions
- staff integration team
- hardware team staff
- software team staff
- people and organization team staff
- conduct integration team training
- prepare team charters
- identify critical decisions : staff, steering committee, and stakeholders
- develop 100 day plans
- present team charters
3.2.6 analyze and define target operation model
- develop target hypotheses
- bank should be able to operate all accounts from both bank
- all branches, ATMs, and SSTs, compatible with both bank account
- define business model : business model is expanded, with support of both corporate and commercial consumers.
- define location, facilities and geographies : all facilities from both bank should be updated with new bank facilities defined before
- define target detailed organization
- define target technology model
- define business consolidation requirements
- identify ongoing cost and benefits
- present target recommendations
3.2.7 assess gaps, impacts and interdependences
- validate completeness of current environment assessment
- conduct gap analysis against defined target operating model
- identify and assess impacts, and key
3.2.8 develop team level integration plans
- defining communication approach to integrate team
- present integration plan
3.2.9 plan and manage costumer experience
- assess corporate and commercial consumer behaviour and event
- identify customer segment
- identify customer impact and risks by segment
- define communication approach
- launch new costumer experience
3.2.10 plan and manage employees experience
- assess employees processing in both bank
- define a new/improved standard of procedures for employees
- launch new employees experience
3.2.11 develop high level organization
- define integration organization structure
- identify integration team leaders
3.2.12 plan and manage culture transition
- set cultural objective : how to integrate corporate and commercial consumers bank’s culture
- assess culture transition process
- develop action to build up culture transition
3.2.13 update merger integration road map
3.3 execute integration plans
3.3.1 kick off execution phase
- start execution phase
- assess execution process
3.3.2 define and implement readiness assessment program
- define implementation readiness
- assess implementation readiness
3.3.3 develop integrated environment
- integrate IT&operation process with another process
3.3.4 prepare integration events plan and logistics
- define initialization of integration and readiness assessment
- assess logistics needs
- execute integration plan
3.3.5 deploy employee program
- execute plan of new employee experience
3.3.6 test integration
- conduct a system test
- analyze system test
3.3.7 conduct dress rehearsal
- conduct a full system test
- analyze full system test
3.3.8 execute integration event
- create integration event, including employees, stakeholders
3.3.9 conduct synergy tracking
- assess new company operation performance
- revise plan according performance
To achieve maximum merger synergy, IT&operations process should be finished as fast as possible. This could be achieved by focusing IT&Operations merger to its most important areas. List below are sorted from area prioritized to area least prioritized :
- Stakeholders and steering committee agreement as a base of IT&Operation road map
- Availability of new system, including
- Hardware (ATM,SST,credit card, network integration,apparatus update, etc.)
- Software (SAPs, training software, etc.)
which is our number one priority. Without working hardware and software, it’s difficult to achieve merger goals.
- Defining key person in top level management, with consideration of both different background and culture
- Employees are very vital to mergers success. In order to grant employees with needed proficiency, we need to conduct several training.
1. Risk Management. Wikipedia, The free encyclopedia. [Online] [Cited: December 20, 2010.] http://en.wikipedia.org/wiki/Risk_management.
2. Ebner, Dorree (Haddon Heights, NJ, US)Bert, Arthur (South Natick, MA, US)Ficery, Kristin L. (Atlanta, GA, US)Kiene, Bruce P. (Mesa, AZ, US)Dailey, Jill S. (Chatham, NJ, US). Merger Integration Framework and Tools. 11/606438 United States of America, November 30, 2006.
3. Accenture. Accenture Mergers & Acquisitions and Merger Integration Services. s.l. : Accenture, 2006.