05 Apr 2019

The Case for Prioritizing Operations During a Merger

Securities Services
Operational efficiency is almost never the primary driver for consolidation; however, it is critical to its success.


Hidden operational costs can derail a merger and often can be blamed for larger strategic setbacks. Costs can also arise when an operational cutover takes longer than anticipated. The more quickly a newly-formed firm can move to common systems, platforms, and processes, the faster it is able to capture the benefits of scale and cost reduction. Prioritizing operational elements also directly benefits both clients and employees of the newly formed firm. Operational failures can lead to gaps in client service, leaving transitioning clients at risk and potentially damaging the brand of a newly aligned firm. Cultural and human factors are notoriously difficult to plan around and can be one of many reasons mergers do not succeed. Consolidating operations can be thought of as another way to fundamentally realign culture around a new approach to business that represents a shared way forward for the new organization.

Migrating operations can be a cumbersome and long process, lasting up to 36 months. During this time, people and processes will naturally change and having a core program management cadre with institutional knowledge and firm-wide reach can be invaluable. With thoughtful planning, collaboration and accountability, asset managers can work with both their internal operations experts and external partners to minimize risks and integrate successfully.

Managing the Operational Consolidation

When asset managers consolidate, the organizational priorities, processes, and people are constantly evolving to meet the strategic goal of consolidation — be it scale, new expertise, or cost savings. Integrating and managing the independent firms’ operational processes in this context is complex yet critical to achieving the goal. Defining the five key areas of operational management during a consolidation and engaging strong program managers can help set the framework to approach the transition.

Five Dimensions of Operational Consolidation


  • Who will be responsible for maintaining the client lens?
  • Who should be in the cross-functional team to ensure we consider operational issues early and often?
  • How do we retain the right level of expertise through this transition?
Geographic Footprint
Geographic Footprint


  • 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?


Technology & Data
Technology & Data


  • How can we rationalize and combine legacy systems?
  • Will we consider technology that sits on top of these systems instead of replacing them?
  • How will we approach a combined data management strategy?
  • How will we train and transition staff to new systems? What time horizon is realistic for this transition?


Operational Functions


  • Which operational functions can merge horizontally and be centralized between firms?
  • Which new products or services bring operational complexities?
  • Who will manage the transition of each workflow at both an executive and tactical level?
Service Providers
Service Providers


  • How do service providers align with the existing and future footprint?
  • How will we structure service-level agreements to address vendor onboarding and off-boarding complexities?
  • Which providers have transition teams and technology that can share the burden of operational transitions?


Bringing the Organizations Together

Whether it’s to combat rising fee pressure or expand their product offering to meet investor demand, consolidation in the asset management industry is expected to continue. As firms approach the process of bringing organizations together, defining the five key areas of operational management and engaging partners throughout the process can help leadership achieve their strategic vision for their combined organization.

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