The Importance of Banking Analytics in Mergers and Acquisitions

The pandemic may have slowed down deal-making activities for banks and credit unions, but trends in M&A are again on the upswing. McKinsey revealed that banking mergers and acquisitions (M&A) were down 37% in the first nine months of 2022 compared to 2021. If banks want to capitalize on M&A opportunities in the post-pandemic world, they need to adopt the right strategy and technology to realize the full value potential in M&A deals.

Using banking analytics is a powerful way for financial institutions to gain insight into the financial performance of companies that may be potential targets for a merger, acquisition, or other types of transaction. Let’s look at how banking insights as a service can help banks maximize the value they capture from M&A.

Choose Your Target

Even before the due diligence process begins, you need to define your M&A blueprint and understand what is important for your institution. It starts by identifying the value of potential targets in terms of revenue building, customer base, technology capabilities, and others.

Data analytics, in this case, can help foresee how the market will react to the merger and whether you should go ahead with the deal. In other words, it provides a bigger picture regarding how the deal will impact the organization’s strategic position.

Ensure Speed and Richness

During a merger, the amount of data that needs to be analyzed is vast. Without a quality data analytics platform, breaking down data silos and connecting disparate data sets can be time-consuming and costly during M&A transactions.

M&A opportunities are time-sensitive, and quickly presenting value propositions to all stakeholders is key to success. Any delay in analyzing data sets can impact opportunities, regulatory compliance, and overall efficiency. The data analytics platform provides on-time insights for better quality decisions and accelerates the deal.

Culture Integration

Traditionally, pre-merger planning usually focuses on the legal and financial aspects of the targets. But post-merger, the new organization and potentially more complex decision-making process can frustrate employees and cause cultural clashes. This generally results in a high rate of talent attrition.

Banks should conduct a quantitative audit of a company’s culture–be data-driven in identifying key talent, understand the conflict points (such as communication process, norms for collaboration, operational freedom, and others), and mitigate risks of a cultural clash.

Final Thoughts

Overall, using banking analytics in M&A can help improve the decision-making process and increase the likelihood of successful transactions. By providing a more detailed and nuanced understanding of the target company’s financial performance and future opportunities, analytics can help banks and other financial institutions make more informed and strategic decisions about moving forward with a potential M&A deal.

Posted on Jan-18-2023