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Mega Mergers

Mega-Mergers in Banking and Securities to Explode By Rich Thomas The boom in banking and securities mergers will continue as we enter the new millenium, according to a new report by Deloitte Consulting and Deloitte & Touche entitled, “Top Ten Banking and Securities Industry Outlook.” The report suggests that mergers are one of several key trends and issues facing financial services companies seeking to preserve their future. It will take more than mergers, however, to make financial services firms successful for the long-term; organizations must also deal with some or all of the following top 10 issues and challenges identified by the report: 1. Creating the Customer-centric Firm. While everyone claims to be focused on the customer, few firms have really succeeded and execution remains the critical challenge. 2. What’s in a Name? Everything. Branding is becoming a critical component in this new digital age. Firms that can build a recognizable brand will enjoy a critical advantage in a cluttered banking/securities marketplace. 3. The Right Stuff. The customer-centric banking and securities firm will require people with new skills, training and compensation. Changing the current sales and service force is very difficult retraining and new hiring will be essential. 4. Integrating Delivery Channels. As delivery channels multiply, firms face the challenge of orchestrating seamless service for customers. The challenge is more than a technological one; it includes all aspects of customer service and people management. 5. E-commerce Becomes a Reality. Once a topic for futuristic speculation, the Internet has changed the competitive dynamics of securities trading, with retail banking fast behind. Banks and securities firms can no longer wait, otherwise, they risk being left behind. 6. Year 2000 Looms. But What’s Next? With final Y2K preparations being wrapped up, leading firms will begin to focus on more strategic IT initiatives in 1999. Prioritization becomes critical. 7. More Mega-mergers on the Horizon. While the industry caught its breath at the end of 1998, the search for cross-selling opportunities and economies of scale will drive more banking/securities mega-mergers in the year ahead. We expect significant activity in Europe to continue, but there will be blockbuster deals in North America as well. 8. New Year’s Resolution: Cut the Fat. Banks and securities firms have rediscovered the importance of reducing costs. Two reasons why: the benefits of many mergers have proved illusive and fee income has dropped due to the financial crisis. 9. The Sound of Barriers Falling. With the creation of a single currency in Europe and a dramatic reduction of regulatory barriers in Japan’s Big Bang, banking and securities firms will confront a host of new business opportunities in two of the world’s largest markets in 1999. 10. Navigating the Economic Minefield Ahead. Although the economic crisis in emerging markets is far from over, nimble players will find opportunities amidst the carnage to acquire firms at rock bottom prices. The rationale for banks and securities firms to merge remains unchanged to realize economies of scale and gain access to a broader array of products and expand globally. Only those with the right leadership and superior execution to effectively address these important issues will secure a commanding position for years to come. Rich Thomas is a financial services partner with Deloitte & Touche in Los Angeles. For more information on the survey, contact Thomas at 213-688-5171.

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