Part 2 book “Mergers and acquisitions in banking and finance” has contents: The special problem of IT integration, what is the evidence, mergers, acquisitions, and the financial architecture, the key lessons. | 5 The Special Problem of IT Integration Information technology (IT) systems form the core of today’s financial institutions and underpin their ability to compete in a rapidly changing environment. Consequently, integration of information technology has become a focal point of the mergers and acquisitions process in the financial services sector. Sometimes considered largely a “technical” issue, IT integration has proved to be a double-edged sword. IT is often a key source of synergies that can add to the credibility of an M&A transaction. But IT integration can also be an exceedingly frustrating and timeconsuming process that can not only endanger anticipated cost advantages but also erode the trust of shareholders, customers, employees and other stakeholders. KEY ISSUES IT spending is the largest non-interest-related expense item (second only to human resources) for most financial service organizations (see Figure 5-1 for representative IT spend-levels). Banks must provide a consistent customer experience across multiple distribution channels under demanding time-to-market, data distribution, and product quality conditions. There is persistent pressure to integrate proprietary and alliancebased networks with public and shared networks to improve efficiency and service quality. None of this comes cheap. For example, . Morgan was one of the most intensive private-sector user of IT for many years. Before its acquisition by Chase Manhattan, Morgan was spending more than $75,000 on IT per employee annually, or almost 40% of its compensation budget (Strassmann 2001). Other banks spent less on IT but still around 15–20% of total operating costs. Moreover, IT spend-levels in many firms have tended to grow at or above general operating cost in- 129 130 0 Mergers and Acquisitions in Banking and Finance 0 .5 1 1 .5 2 Citicorp Chase Deutsche Bank Credit Lyonnais Barclays Bank of America NatWest JP Morgan UBS Credit Agricole Nations Bank Bankers Trust ABN .
