Mergers and Acquisitions in Banking: A Framework for Effective IT Integration

Abstract

This study aims to identify key issues in the information technology (IT) integration in mergers and acquisitions (M&A) in banking and propose an approach to increase the efficiency of such integration. The study produces a first cut IT integration framework based on the literature review into the key factors in IT integration in banking and selected popular IT governance models, such as Control Objectives for Information and related Technology (COBIT), and then refines it with the help of IT practitioners based on their involvement in a number of high-profile banking M&A cases. The proposed framework is thus underpinned by the latest theoretical thinking in the relevant subject field and builds on relevant practical experience. Senior level IT practitioners in banking organisations can employ the framework to inform and guide the execution and post-mortem review of their M&A integration projects.Keywords: banking, mergers & acquisitions, IT Integration, IT governance, cobit, framework Aims and ObjectivesThe study aims to expand the knowledge base on the IT integration best practices as applied to the M&A practice in banking. To achieve that, a number of large-scale high-profile banking M&A cases were investigated by interviewing key senior level technology officers directly involved in the delivery of those projects. Some of the results of the study were published in another work, Kovela and Skok (2012), which among other things confirmed that IT is a critical resource and enabler in the business model of modern banking and therefore a clear link between the business strategy driving the merger and the priority of the IT integration tasks which are key for the efficiency of M&A transactions. The current paper builds on and complements these findings by proposing a framework for those embarking on the process. The objectives here are: To establish whether the adoption of an IT integration framework is necessary for efficient integration in M&A in banking. To survey the landscape of existing IT governance frameworks and identify those that could potentially be used as a basis for the above M&A IT integration framework. To create a M&A IT integration framework and then benchmark and adjust it against the practice-based summative profile of the banking M&A IT integration process.As a result, a generic optimal M&A IT integration framework, henceforth referred to as the "IT integration framework", would be formulated. The final deliverable of this work will be a theory-based and informed-by

Post-merger IT Integration in Banking: Literature Review

“…absorption vs "best of breed") and the dynamics of the IT integration process. Kovela and Skok (2015), suggests that considering the pervasiveness of the IT function in banking business operations it would make sense to consider the post-merger IT integration project in the context of IT governance. Kovela and Skok propose structuring the IT integration process based on the elements of Control Objectives for Information and Related Technologies (COBIT), a popular IT governance framework by ISACA ( 2018), and combine it with the reflections of selected leading industry practitioners based on their involvement in a diverse selection of high-profile banking M&A projects.…”

“…The academic sources view the post-merger IT integration chiefly in the context of business-IT alignment, IT governance, and specific aspects such as systems, process, knowledge, and risk. Reflecting on this situation and based on an earlier work by one of the authors (Kovela & Skok, 2015), several applicable popular industry frameworks were identified (see Table 3).…”

“…IT stack for Fixed Income, Equities, etc. ), and the resulting overall integration/separation model ends up being a mix of the above options (Kovela & Skok, 2015). The mix of dimensions involved in an IT integration project will then be determined on a case-by-case basis.…”