The M&A trend has caught like wildfire in the competitive world of private banking in Asia.
Wealth managers have kept everyone guessing about the next potential deal as large, multinational banks search for the right businesses to grow their operations in the world’s richest region.
Two of the most talked-about transactions this decade have been DBS’s ANZ deal and the acquisition of Coutts by Union Bancaire Privée (UBP). Indosuez Wealth Management’s purchase of the private banking division of Crédit Industriel et Commercial (CIC) in Singapore and Hong Kong also took the industry by surprise.
These mergers added billions in assets and millions in revenues for the acquirers, but what went on behind the scenes?
DBS acquired the wealth management and retail banking businesses of ANZ across Singapore, Hong Kong, mainland China, Taiwan and Indonesia in October 2016. Understandably, integration was a complex process, involving different regulations, banking systems, customers and business models across the five jurisdictions. As such, migrating client assets worth SGD 18 billion ($13.2 billion) was no mean feat.
‘The scale was huge – we had to onboard over 2,300 staff and 1.4 million customers across five countries,’ says V Arivazhagan, the chief operating officer (COO) for DBS’s consumer banking and wealth management group.
In order to ensure a seamless transfer for all ANZ customers – including about 100,000 affluent and high-net-worth individuals – DBS had to first conduct thorough due diligence on ANZ’s compliance process. This included checks such as anti-money-laundering, knowyour- customer and transaction monitoring.
After that came the hard part: dealing with huge volumes of data. ‘The larger the number of products and customer segments, the larger the number of migration scripts that need to be built and tested,’ Arivazhagan says.
Reconciliation was another challenging task, he says, requiring multiple iterations. The bank had to ensure the data migrated into DBS systems in five markets matched the ledger generated by ANZ.
As a result, DBS had to run system tests, dress rehearsals and training programmes in the countries involved prior to the migration. DBS and ANZ also organised ‘operational readiness tests’ in the form of scenario simulations in branches and call centres to monitor staff preparedness.
Time for change
Not only did DBS have to migrate large volumes of client data across five countries, but it also had to ensure the smooth transfer of ANZ staff across these culturally diverse jurisdictions.
By February 2018, more than 90% of ANZ employees had joined DBS. Managing them appropriately was a key element of the integration for which even the regulators wanted Change management is one of the most important elements of an integration, but it is often ignored. A clear communication plan and a senior care team fully enabled by the management are absolute necessities, according to Yves Roesti, the managing partner of the consulting firm Synpulse.
Roesti notes that a key issue during integration is understanding the target firm’s DNA and organisational weave and integrating that into the acquirer’s setup and reporting structures.
It is no wonder, then, that Indosuez’s Asia CEO, Pierre Masclet, and his senior management held multiple town halls, team briefing sessions and one‐on-one meetings with CIC’s employees.
Masclet says: ‘We went the extra step to assign “buddies” between the existing staff and the newly integrated staff, so that the new staff have someone they can approach when they encounter any process, system or structural issues.’
About 150 CIC staff members were transferred across Singapore and Hong Kong in only four and a half months, ending in December 2017. During the course of 2018, Indosuez continued to hold regular orientation programmes for CIC employees. The French private bank also held more one-on-one meetings and group sessions and sent out newsletters and intranet updates to gather feedback and concerns.
Today, the management and human resources teams continue to provide additional coaching for junior managers who are facing challenges with change management, Masclet says.
The cost factor
The CIC acquisition grew Indosuez’s AUM in Asia to $13.6 billion, an increase of 40%. UBP’s purchase of Coutts’ international businesses, however, takes the cake in terms of brilliant plays on AUM. Finalised in 2015, the deal increased UBP’s private banking assets across Singapore and Hong Kong by 900% to $10 billion.
However, an acquisition of this size requires significant investment. Aside from the cost of the transaction, UBP had to set up a new branch and gain licences in Hong Kong, says Jeff See, a senior adviser at Synpulse. See, who was previously the Asia COO at UBP, adds that the bank had to significantly scale up its capabilities in Singapore and grow its Asia-based relationship manager team overnight to 65, multiplying personnel costs. The company also absorbed Coutts’ full product shelf.
To ensure cost discipline from day one, UBP deployed a leaner operating model. This included outsourcing the bank’s operations and IT platform, localising the product shelf to Asia and building partnerships to launch products more quickly.
The company also adopted measured engagement of consultants and contractors and closely monitored travel costs and third-party supplier arrangements, See says.
In short, incurring significant costs, managing change and migrating data are just some of the headaches of post-merger integration. So, you think you want to acquire a private bank in Asia?