By Steven I. Davis (auth.)
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Extra info for Bank Mergers: Lessons for the Future
Customers won't allow current high product prices with lower cost alternatives available. We've got to cut costs. We're going to continue to live in this tough competitive environment. Our merger model therefore is to convert to our platform, cut out duplicated overhead, and knock out excess management layers. With hundreds of bank mergers taking place each year, the US has understandably developed the most refined merger cost model. 1 Likely source of merger cost savings Typical savings on smaller company cost base Years of Range of cost saves capture Executive and general 80 100 1 adminstration % Marketing 60 Legal 50 HR Audit and accounting Facilities IT 100 90 Treasury 90 70 60 40 50 30 1 1 1 1 2 20 30 2-3 20 30 2 Credit/mortgage operations 30 Payments operations 25 40 30 2 2 Deposits operations 10 20 2 Others operations 10 20 2 Branch network 20 Source: McKinsey & Company.
Thus for banks like Fleet, BSCH, Chase, Erste, First Union, UBS, and Deutsche Bank, the challenge is to move as quickly as possible to make these key decisions and join the banks at the operational level. At Planning the Merger 41 Deutsche Bank, Scott Moeller, who co-ordinates the integration teams in London for the key Global Corporates and Institutions Division in its acquisition of Bankers Trust, recalls the lessons from Deutsche Bank's earlier efforts at acquiring an investment banking entity: Deutsche's management drew a lot of lessons from the Morgan Grenfell acquisition in 1989.
Thus a wide range of senior bankers at Chase, ABN Amro, Bank One, ING, Lloyds TSB, Credit Agricole, Merita Nordbanken and Wells Fargo emphasised that they would only contemplate such transactions where management presumably welcomes the merger. Thus both Walter Shipley of Chase and John McCoy of Bank One point to their ability to attract merger partners who might not otherwise be interested in a deal ± as well as the obviously better internal climate for executing it. By the same token, Tom Grondahl of Den norske Bank, which acquired the Vital insurance company by successfully bidding against a foreign partner welcomed by Vital management, acknowledges that: We were a `black knight' [as opposed to a white one] for Vital, and there was resistance in the beginning to the merger.