Avoiding Common Pitfalls during M&A’s

Author: Liqueo Mergers & Acquisitions Team

The wealth management sector is undergoing a profound change; creating challenges and opportunities in equal measure. Continued downward pressure on fees is driving the vertical integration of manufacturers with distributors, to preserve margins. Additionally, the UK marketplace is still incredibly fragmented and in over-supply — leading to a consolidation of providers to achieve scale. Finally, there is an ever-increasing use of technology to improve cost efficiency, which simultaneously creates barriers-to-entry to new competitors.

Firms will typically prefer to address these challenges through organic growth, but the alternative inorganic option of merging with or acquiring another firm is not without its pitfalls.

In the following article, we examine five key issues that firms need to consider when going down the mergers and acquisitions (M&A) path.

Cultural fit and models

Perhaps the greatest risk to the successful integration of two businesses is managing the differences in culture and models. Whether this is weighing the pros and cons of a centralised versus a decentralised model, marrying differences in investment philosophy, or combining propositions, or aligning pricing structures, these need to be addressed quickly and resolutely. 

Setting a clear path, communicating the vision, and managing the journey is critical in preventing a lack of affinity amongst employees, or avoiding deeper long-term divisions across the merged entities.

Managing key personnel and expectations

In Wealth Management, a firm’s biggest assets are its advisors and clients. When the latter leaves, the other tends to follow. Whilst there will be some inevitable, regretted losses during any integration, pre-deal due diligence should identify key personnel, offering associated retention packages and assurances to retain their loyalty.

Only through the process of managing the cultural journey will the longer-term game of winning hearts and minds become clear.

Merge platforms and legal entities quickly

The post-deal organisation will likely have multiple platforms and legal entities to contend with. Retaining and managing them all will be costly and creates a confusing proposition, yet quick fixes will significantly increase execution risk. Platform decisions are usually made during the due diligence phase so should be relatively straightforward to execute.

Decisions around legal entities will be more complex and will likely be driven by the combined firm’s go-forward proposition.

Finally, do not underestimate the power of changing platforms to further disenfranchise those people not already sold on the cultural journey! 

Clear governance, oversight, and communication

A successful integration requires a strong governance structure to manage various workstreams. Senior management needs to be aware of the stresses placed on involved employees, while they continue with their day job.

Senior leaders need to be visible during the integration process, and provide frequent updates, via a highly competent communications team.

Synergy targets

History has shown that synergy targets are often the biggest challenges and the hardest to deliver. A detailed plan will have been defined during the due diligence phase, but this must have senior leader accountability for delivery during the integration.

Again, consistent messaging is required throughout the organisation via effective communication channels.

Liqueo’s mission

Liqueo’s mission is to be the global consulting partner of choice within Asset and Wealth Management. Our approach is to deliver an exceptional, bespoke service to every client via a dynamic and agile framework.

Our senior consultants are available for individual engagements to work closely with your organisation on design and implementation of tailored programmes.

We also offer a consulting model to build and manage bespoke engagements, specialising in culture and hiring of specialised talent to promote teamwork, efficiency, and accelerating your priorities.

Our extensive experience in large-scale transformation programmes allows us to quickly understand your situation and mobilise for delivery.

Here at Liqueo, we provide organisations with the skills to implement programmes successfully through our flexible workforce model, tailoring solutions for our clients’ strategic goals. We deliver an exceptional, bespoke service to every client via a dynamic and agile framework. If you are interested in how we can help you implement successful programmes or want more information about avioding common pitfalls, contact us.