05 Apr 2019

Managing Your Expanded Footprint as the Result of a Merger

Securities Services
Rationalizing an expanded geographic footprint is challenging but it can open opportunities to enhance firms’ operating models.


Firms going through a merger will always have to contend with an expanded geographic footprint, even if it is just two offices within the same city. Managing the expanded footprint presents a number of challenges; such as determining what locations to keep, where to base certain activities, and how to manage associated staff dislocations. Despite these challenges, an expanded footprint also gives managers the opportunity to develop a location strategy to best support its desired operating model.

Review Your Existing Footprint

Assessing a firm’s footprint involves a detailed review of fixed assets, real estate, and infrastructure across various geographies, often with differing approaches to deprecation, accounting, and local registration. Real estate contracts and agreements around other physical resources are often complex. A merger adds to this complexity, as multiple parties work to transfer fixed assets, potentially reassign leases, or acquire and offload properties.

While these functions necessitate extensive legal coordination, they also have financial accounting implications and connect to other operational elements. For example, running certain technological infrastructure in specific regions can bring the entirety of the firm’s data in scope of the jurisdiction’s regulation. This makes decisions around placement of activity a legal, regulatory, operational, and strategic consideration. Cross-functional teams that include expert representation from operations and technology are best-positioned to holistically address fixed-asset issues.

Executives need to be able to create a single distribution and service model across the new business. Consolidations offer firms an opportunity to review their entire geographic strategy and footprint to look for new efficiencies.
Julie Kerr, APAC Head of Securities Services, Citi
Julie KerrAPAC Head of Custody and Fund Services, Citi

Optimizing Your Footprint

When evaluating their geographic footprint, firms should assess opportunities to take advantage of lower-cost operational hubs. A number of Eastern European and Asia-Pacific countries continue to position themselves as strong candidates for operational hubs not only because of relatively lower costs  but also due to their depth of technical talent. Firms should evaluate their operational hubs in tandem with those of their providers and partners.

Service providers that offer a “follow-the-sun” model, who can pass transactions around the globe, are becoming increasingly important as both customers and those who serve them must be able to respond at any hour. Business day cut off timing is a critical aspect of operational planning, as it has a number of operational implications for accounting, regulatory reporting, and audit.

For example, processes like the Accounting Book of Record may be location specific; if an asset manager has a global portfolio, they likely need to wait until the US markets close. This necessitates firms choosing a partner for these middle and back-office functions that can support global operations and understands how working across time zones has concrete implications for the business. A service provider with a centralized, single platform online during all globally relevant business hours can smooth operational challenges across geographies, especially on a go-live date when the new firm is operating as one, possibly in many new territories at once.

Many firms may find that operational providers with a global footprint save them from having to resource in-country staff to provide ground-level expertise. Understanding where a service provider can offer insight on regulatory changes and local issues can be helpful as firms look to consolidate and expand into new markets.

Key Questions to Consider

When dealing with a new footprint, firms should look beyond the challenges and look to leverage an expanded footprint to enhance its operating model. When doing so, here are three key issues executive leadership should consider:

  • What is the gap between our current and future geographic footprint?
  • What regulatory changes and considerations come with new jurisdictions?
  • Where can we establish cost-effective operational hubs?
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