SOA: the easy way to structure M and A

Merger and acquisition activity in European retail banking is reviving, with talks beginning between La Caixa, the Catalan savings bank, and its smaller competitor, Banca Cívica.  These talks have been described as the ‘second wave of Spanish banking consolidation’, following the acquisition of Unnim, the nationalised savings bank, by BBVA, Spain’s second-largest bank earlier in the month.

Banks are looking to increase efficiency, cut costs and grow market share in this ever-changing market, by merging with, or acquiring, a competitor.  The increased rate of M&A activity occurring in the European market goes some way to illustrating the appeal of such a venture. 

The challenges with M&A are, unsurprisingly, numerous.  From difficult shareholders, to the consolidation of cultural differences and communication problems, M&A can be tricky to handle.  This is why any shared values, standards or frameworks can provide a stable basis from which to then organise the consolidation process.

The operational upheaval and systems rationalisation is perhaps the biggest challenge the new bank will face. Competing IT application portfolios of the merged entities will need to be compared and decisions made as to which applications will survive the cut. If the two organisations operate on the same semantic understanding, with a common language, any communication issues ought to be significantly reduced.  The same could be said if the two have standardised understanding and definitions of the various banking capabilities, as these could then be used as an organising framework to structure the assessment and migration planning. 

Of course, to take this one step further, if the two organisations are BIAN members and have collaborated in the past, to work on a common IT architecture, with internal application to application interoperability, then the merging of their IT systems would almost be a non-issue.

The financial crisis of recent years has proven that the force of globalisation brings with it increased competition and increased pressures.  Interoperability via SOA and standardisation is the key to staying ahead of competitors, both in terms of flexibility, with regards to innovation and modernisation, but also in terms of merger suitability and ease.