Articles - The need to integrate key business processes in M&A activity

It was recently reported that low interest rates and increasing investments are causing the number of mergers and acquisitions (M&A) in the insurance industry to rise. This environment is lending itself to industry consolidation, with insurance firms taking advantage of the low interest rates that enable cheap borrowing for strategic financial investments.

 By Robert Gothan, CEO and founder of Accountagility
 However, business integration is a complex process, and the merging of two companies’ processes is often not managed effectively. To avoid the need to unpick errors and amend information further down the line, firms need to understand how to integrate systems successfully and simultaneously gain key business insights.
 Integration issues
 When organisations merge, data from different systems and spreadsheets is often cobbled together, with businesses trying to match up puzzle pieces that do not fit together. It is often assumed that systems are similar and can be easily assimilated, or that diverse systems can be bodged together and expected to work efficiently. Unfortunately this is not the case, and companies often find themselves with complex systems that lack transparency, which causes reporting and procedure headaches further down the line.
 A positive prospect
 Although it is tempting to make process integration as hasty as possible when acquiring or merging with another business, it should in fact be dealt with cautiously and methodically. Many companies fail to analyse how well individual systems are working, and overlook any glitches, when in fact it is the perfect opportunity to review these systems and reflect on how current process can be improved.
 To begin with, insurers should compare their own systems to those of the other firm. This way, they can detect where the challenges lie for each, and identify which systems are dealing with any issues most efficiently.
 To achieve this goal, integration teams should ask themselves if any of the common problems they encounter are solved by either organisation, and then carefully select the best of both systems. M&A activity also provides the chance for firms to tighten up on compliance issues by identifying different levels of risk and deciding what procedures need to be implemented to fill any gaps.
 A strategy for success
 The first step in the integration process is to review the core business areas for both firms thoroughly, including any critical processes, user spreadsheets, documentation, and the amount of time currently spent running each database. Manual processes can be time-consuming and error prone, so where possible they should be automated for a more effective and streamlined process. In addition, where process have previously been completed manually, a review of due diligence will be in order, with auditing and testing of systems taking place to detect any past errors before they are merged with new systems or automated.
 Although risk levels are likely to have been considered in the initial stages of any M&A activity, there should be a further review of risk at the point of system integration. This way, firms will be able to understand exactly what process risks they are taking on, as well as which can be avoided and which can be automated.
 At this stage, firms can begin to delve more deeply into their reporting processes. Spreadsheet mapping should also be looked at carefully, as it will provide key insights into how each business operates, and how end results are being calculated. Firms will also need to consider how their data is being gathered, and from which systems, and whether the same data is being used in different ways to compile a report. Armed with this information, firms will be able to decide how their data needs to be stored, using insights from the review process to form decisions on how data will be aggregated and presented moving forward.
 The best of both
 The on-boarding process should be seen as an opportunity to unlock value and adopt best practice during M&A activity. If handled deliberately and intelligently, mergers and takeovers can allow firms to review their existing processes and those of the other party, signalling areas for improvement and automation, and in turn increasing efficiency and minimising risk points for the resulting entity.

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