Data Considerations for Successful Deal Integration

Bank M&A activity is heating up in 2021; already, a number of banks have announced deals this year. Is your bank considering a combination with another institution?

Banks initiate mergers because of synergies between institutions, and to achieve economies of scale along with anticipated cost savings. Acquiring institutions typically intend to leverage the newly acquired customer base, but this can be difficult to execute upon without a data strategy.

Whether your bank is considering are buying or selling, it has never been more important to evaluate whether your data house is in order. Unresolved acquisition data challenges can result in poor customer experiences, inaccurate reporting and significant inefficiency after the merger closes. What causes these types of data challenges?

  • Both institutions possess massive volumes of data and multiple systems, while disparate systems prevent a holistic view of the combined entity. In a merger, the acquirer does not have access to the target’s data until legal close, and data is not consolidated until the core conversion is completed.
  • Systems are often antiquated, and it is difficult to access high-value customer data. Data integrity is often an issue that impedes anticipated synergies that could promote revenue generation.
  • Absence of enterprise knowledge or insight into target’s customer portfolio. This makes it difficult to identify growth opportunities and plan the strategy for the combined institution. It also creates a barrier to pivoting in the event a key relationship manager leaves the institution.

Baltimore-based Howard Bancorp has conducted five successful acquisitions in the last eight years. Steven Poynot, Howard’s CIO, recommends looking internally first and getting your house in order prior to any merger. “If you don’t understand all of the pieces of your bank’s data and portfolio well, how are you going to overlay your information in combination with the other bank’s data for reporting?”

Five solutions to merger data challenges include:

  • Create a data governance strategy before a deal is in the works. Identify the source and location of all pertinent data. Evaluate whether customer data is clean and up to date. Stale customer information such as old land line phone numbers and inaccurate email addresses yield roadblocks for relationship managers attempting to use data effectively. If your bank does identify data issues, implement a clean-up project based on a data governance policy framework. This initiative will benefit all banks, not just those looking to merge.
  • Develop an M&A integration plan that sets expectations and goals. Involve the CIO quickly and identify tools needed for the integration. Make a strategic determination of what data fields need to be integrated for reporting purposes. Acquire tools to allow for enterprise reporting and to highlight sales opportunities. Partner with vendors who understand the specific challenges of the banking industry.
  • Unify Disparate Systems. Prioritize data integration with a seamless transition for customers as the top priority. Plan for mapping and consolidating data along with reporting for the combined institution. Take product and data mapping beyond what is needed for the system mapping required for core integration. Use the information gleaned from the data to support product analytics, risk assessment, business development and cross selling strategies. The goal is to combine and integrate systems quickly to leverage the data as an asset.
  • Discourage Data Silos. Make data available and easily accessible to all who need it to do their jobs. Banking is a relationship business, and relationship managers need current customer relationship information readily available to them.
  • Analyze. Once the data has been consolidated, analyze and leverage it to identify opportunities that will drive revenue.

In a merger, the sooner that data is combined, the earlier decisions can be made from the information. As data silos are removed and data becomes easily accessible across the organization, data becomes an enterprise-wide asset that can be used effectively in the bank’s strategy.

Pandemic Challenges, Strengthens Bank’s Deal Integration

One bank found that the Covid-19 pandemic actually accelerated its deal integration, creating a stronger pro-forma institution to serve clients after overcoming a number of unexpected hurdles.

The coronavirus crisis has thrown a wrench in bank mergers and acquisitions, challenging everything from due diligence to pricing to regulatory and shareholder approvals. Only two bank deals were announced in May, according to S&P Global Market Intelligence; potential buyers and sellers seem to be focusing on assisting customers while they wait for a normalized environment. But Sandy Spring Bancorp found itself with no choice but to adapt its deal integration with Rockville, Maryland-based Revere Bank, even as both banks shifted to a remote work environment.

For us, it’s very important to understand that not just the successful integration, but a successful acquisition is centered around finding the right partner to begin with,” says Sandy Spring President and CEO Daniel Schrider. “And it’s really important … to find an organization that either complements what we do or provides access to a different market that maybe we’re not in, but has a shared vision around client relationships.”

The Revere team was well-known to Sandy Spring, with executives serving on their state bank association as well as competing against each other for local deals. After talking for about 18 months, they announced their merger agreement in September 2019; the deal pushed the Olney, Maryland-based bank above $10 billion in assets.

For months, deal integration proceeded as expected. The banks kicked off internal communication campaigns to keep both groups informed of the timeline, process and upcoming changes, and increase comradery before merger close. They formed 20 cross-functional teams of employees from both companies that tackled specific integration-related tasks or objectives, which met through mid-February.

“Both companies had tremendous first quarters. We were very excited about bringing the two organizations in a new structure and pulling the trigger on a number of things, based upon our ability to be together,” he says. “Then obviously, things came to a screeching halt.”

Once the pandemic closed physical offices, Sandy Spring used video and electronic communication to continue integration work. The pro-forma executive team created welcome videos featuring Schrider, along with digital and virtual orientations, instead of the usual face-to-face interactions.

But the integration encountered yet another unexpected challenge: the Paycheck Protection Program. The Small Business Administration loan program began accepting applications on April 3, two days after the Revere acquisition closed.

All of a sudden, two companies were faced with trying to solve the problems that many of their clients are having,” Schrider says. “That actually accelerated our integration.”

The newly combined teams, which pride themselves on being relationship focused, worked together to fulfill the unsolicited loan demand. They hosted daily PPP calls and involved more than 200 employees to process applications from customers at both banks. The undertaking combatted any inertia they may have felt about actually combining and functioning as one company.

“In a strange way, we’re probably in a better place today than we would have been, absent a pandemic, from the standpoint of being together,” he says. “Even though we’re not physically together.”

Sandy Spring believes picking a bank partner with similar values and staying focused on its strategy helped the pro-forma institution navigate deal-specific challenges. For instance, the all-stock deal for Revere originally carried a price tag of $460.7 million when it was announced in September; at close, it was valued at $287 million based on Sandy Spring’s quarter-end stock price, according to S&P Global Market Intelligence. Schrider says potential buyers and sellers should avoid fixating on absolute deal price, and instead consider the relative value and potential upside of the combined entity’s shares.

So far, the only integration activities that the pandemic has paused are reorganization efforts the bank believes are best done in person, including the planned appointment of Revere co-CEO Ken Cook as executive vice president. The systems conversion and branch consolidation are still on track for the third quarter. Until then, the pro-forma institution will continue to integrate while serving clients during the pandemic.

“It’s been a wild ride but a good one,” Schrider says.

Consolidating Technology for a Merger of Equals


merger-4-24-19.pngMergers of equals are gaining in popularity, judging by the flurry of recently announced deals, but a number of tough decisions about technology have to be made during the post-merger integration phase to set up the new bank for success.

After every deal, management teams are under a great deal of pressure to realize the deal’s projected expense savings as quickly as possible. While the average industry timeline to select and negotiate a core processing contract is nine months, a bank merger team has about a third of that time—the Cornerstone framework estimates 100 days—to choose not just the core, but all software as well, and to renegotiate pricing and contract terms for the most critical systems so that integration efforts can begin.

Start with the Core
A comparison of core systems is often the first order of business. These five factors are the most relevant in determining which solution will provide the best fit for the post-merger institution:

  • Products and services to be offered by the continuing bank. If one institution has a huge mortgage servicing portfolio or a deeper mix of commercial lending, complex credits and treasury management, the core system will need to support those products.
  • Compatibility and integration with preferred digital banking solutions. If one or both merger partners rely on the delivery channel systems offered by their core providers, the integration team should evaluate the core, online and mobile solutions as a bundled package. On the other hand, if the selection process favors a best-of-breed digital channel solution with more-sophisticated service offerings, that decision emphasizes the need for a core system that supports third-party integration.
  • Input from system users. The merger team must work closely with other departments to evaluate the functionality of the competing core systems for their operations and interfacing systems.
  • Contractual considerations. The costs of early contract termination with a core, loan origination, digital channel or other technology provider can be significant, to the point of taking priority over functionality considerations. If it is going to cost $4 million to get out of a digital banking contract, the continuing organization may be better off keeping that system, at least in the near-term.
  • Market trends. Post-merger, the combined bank will be operating at a new scale, so it may be instructive to look at what core systems other like-size financial institutions have chosen to run their operations.

A lot of factors come into play when the continuing bank is finalizing what that solution set looks like, but at the end of the day, it is about functionality, integration, cost and breadth of services.

Focus on the Top 20
The integration team should use a similar process to select the full complement of technology required to run a modern financial institution. Cornerstone suggests ranking the systems currently in operation at both banks by annual costs, based on accounts payable data sorted by vendor in descending order. Next, identify contract lifecycle details to compare the likely costs of continuing or ending each vendor relationship, including liquidated damages, deconversion fees and other expenses.

That analysis lays the groundwork to assess the features, functionality and pricing of like systems and rank which options would be most closely aligned with customer service strategies, system capabilities and cost efficiencies. It might seem that an objective, side-by-side comparison of technology systems should be a straightforward exercise, but emotions can get in the way.

A lot of people are highly passionate and have built their bank on being successful in the market. That passion may come shining through in these discussions—which is not necessarily a bad thing.

Working with an expert third party through the processes of system selection and contract negotiations can help provide an objective perspective and an insider’s view of market pricing. An experienced business partner can help technology integration teams and executives set up effective decision-making processes and navigate the novel challenges that may arise in realizing a central promise in a merger of equals—to create value through vendor cost reductions.

Toward that end, the due diligence process should identify about 20 contracts—for the core, online and mobile banking, treasury management, card processing and telecom systems, to name a few—to target for renegotiation in advance of the official merger date. A bank has hundreds of vendors to help run the enterprise, but it should focus most of the attention on the top 20. The bank can drive down costs through creative economies of scale by focusing on those contracts that are the most negotiable.

With its choice of two solutions for most systems and the promise of doubling volume for the selected vendors, the new bank can negotiate from an advantageous position. But its integration team must work quickly and efficiently to deliver on market expectations to assemble an optimal, cost-effective technology infrastructure—without cutting corners in the selection process and contract negotiations.

Think of this challenge like a dance. It is possible to speed up the tempo, but it is not possible to skip steps and expect to end up in the right place. The key components—the proper due diligence, financial reviews and evaluations—all still need to happen.

Download the free white paper, “Successfully Executing a Merger of Equals,” here.

Integration: Keeping The Best



Bank leadership teams that approach an acquisition with an open mind will have the best odds for successfully integrating the target, says Kim Snyder of KBS Results. In this video, she shares the three most common misconceptions held by acquirers. She also outlines how banks should communicate to employees and customers about an acquisition, and explains how to approach technology integration—so acquirers can ensure the target’s customers stay with the merged institution.

  • Common Misconceptions
  • Communicating to Employees
  • Explaining Benefits to Customers
  • Getting Technology Integration Right