Integration has to be priority in takeovers

Bernie Levins PIPC

Mortgage Strategy, April 2011

Consolidation in the mutual sector continues with the announcement that Yorkshire Building Society is planning to take over the smaller Norwich & Peterborough.

If this progresses, the Yorkshire will have added significant bulk to its assets and branch network.

This should create an opportunity for cost savings by eliminating duplication across the two businesses, and could fund improved savings rates and better services for a bigger member base.

But the issue with integrating businesses is that often the benefits outlined in the acquisition rationale are not delivered.

During such transformations experience is essential and it’s a concern that the Yorkshire’s chief executive officer Iain Cornish, who was at the helm during the successful Barnsley and Chelsea integrations, is stepping down.

The new team will have a challenge on its hands to ensure this venture succeeds. Integration is a complex and messy business but following some fundamental principles can increase the chances of it working.

These include creating a clear roadmap for integration, not striving for planning perfection, and appointing a dedicated integration team.
The short-term priority has to be the integration effort - there will be time for optimisation later.

Trying to do both at once risks not only the integration itself but also the speed with which benefits are delivered. This acquisition can be a success and it appears to be a good fit, but the leadership will be judged on delivering the benefits.