ASPIRE: An Adaptive Integration Strategy For Successful M&A In Financial Institutions

Originally published in . Link.

According to the Harvard Business Review, approximately 70% to 90% of all mergers and acquisitions (M&A) fail to meet the expected goals and synergies. Mergers and acquisitions often fail in predictable but preventable patterns, especially during the integration stage.

Focusing on integration, this paper proposes ASPIRE (an “adaptive strategy for post-integration risk-based engineering”) to mitigate risks, cut costs and develop a roadmap that strategically models the integration of business and technology ecosystems with 12 critical factors.

At the heart of ASPIRE is innovation based on domain-driven financial intelligence gained through human experiences, regulatory advice and, most importantly, machine learning leveraging the merged datasets harvested across the ecosystems of both institutions — the acquirer and the acquired.

What differentiates ASPIRE is that it invests in intelligence, insights, and innovation for long-term business growth. It is a business strategy enabled by technological innovations. More importantly, it is data-driven, it is adaptive and it optimizes as more insights are gained to revise the roadmap into actionable steps.

A Risk-Based Strategy For M&A

Many M&A failures are rooted in the misinterpretation of when and where the journey starts, while others are due to mistaking the conversion completion as the end. However, most roadmaps rightfully focus on critical milestones like Legal Day (LD1) and Conversion Day (CD1) from the business or procedure perspective but, unfortunately, neglect the integration of IT systems and data.

Yet uncertainty and risks associated with it are gravely underestimated, which leads to systemic planning errors or operational challenges to do with branding, retention of customers and reassignment of inherited workforces, especially those that possess deep knowledge or unique skills in technology or business. ASPIRE is a risk-based strategy for integration aiming to, first of all, mitigate these risks.

A Business Growth Strategy With M&A

This strategy has been focused on banking clients in all phases, including initiating, planning, executing and closing. As a boutique firm, we work with clients in every step of the M&A journey.

We measure our contribution by cost-effectively pushing through the critical path from commencing date to LD1 to CD1 and sustaining quantifiable business growth post-integration in terms of customer retention and revenue growth in merged domains of products and services. We enable it with our innovation for M&A.

An Innovation-Enabled Approach For M&A

At its heart, ASPIRE is a 12-factor M&A integration model that leverages AI/ML running on federated repositories of facts, evidence, discovery, planning and roadmap, talent matrix, team accountability, near-real-time progressive status, issues and resolutions, all of which feed into the M&A journey. Here are the first 10.

1. Model risks.

2. Complete domain-driven business capability mapping (BCM).

3. Develop a roadmap.

4. Start agile stories with timelines.

5. Define RACI.

6. Recruit, retain and retrain talents.

7. Rebrand and reorg.

8. Plan and implement actions for customer retention and products and service integration.

9. Complete systems and data integration.

10. Implement security integration, leveraging the total security framework.

Innovation begins when these factors can be used to develop, train and deploy the AI and machine learning model in individualized cases of M&A. In other words, it is an adaptive model. But how can your clients implement ASPIRE to enable M&A successes?

ASPIRE: Step-By-Step Implementation With The M&A Playbook

Each M&A is unique. We recommend implementing ASPIRE with an adaptive M&A playbook, which starts from launching to discovery and continues from planning to execution. The secret sauce is the AI/ML model running on fresh data from the M&A to enable all parties and each individual with actionable insights and time-boxed tasks on a daily basis. Two additional factors come into the model.

1. Next-best action (NBA) for each step through the critical path.

2. M&A ROI, which can be measured in cost and contribution, business growth in customer retention, market expansion and revenue from merged or added products and services 18 months after the closing date.

The 12-factor model is also the 12-step template for the playbook. The playbook is the user manual that adaptively reflects the underlying engineering capabilities deeply rooted inside the M&A activities and adapts as the M&A is implemented.

The steps, however, do not all go sequentially. Iteration and parallel development and execution are mapped in QPN, a mathematical performance model, which is part of the ASPIRE AI/ML modeling. Modeling also includes strategic treatment of uncertainty, which is always present but typically under-appreciated. When it arises, people panic, and the deal dashes. Human intelligence has limitations. M&A is a complex act, and complexity overwhelms even the best experts or leaders. This is when and where ASPIRE comes to the rescue. This is why and how ASPIRE differentiates from all other strategies or frameworks.

As a result, ASPIRE provides a dynamically virtualized and critical path with the status prioritized deliverable, marked by who, where, when and all relevant metadata. This makes the whole M&A like a play, concurrently in multiple stages. Risks are not only visible but so are mitigation steps. Even if one critical data element is missing, it is hard for senior leadership not to notice it. However, leadership also sees the aggregated strategic implementations, while team members only need to focus on specific tasks at hand. This translates into strategic reprioritization and sustainable execution throughout the whole M&A journey.

Conclusion

Every M&A execution is different. While they all share common business objectives, there is no silver bullet. But ASPIRE’s 12-factor AI machine learning model is adaptively redeveloped, retrained and redeployed to maximize M&A successes. When M&A is employed as a strategy for business growth, one merger may follow another acquisition, so when ASPIRE repeats, it gets more efficient since it is a product-based solution that’s developed for and used by the client.