Consolidation of the IFA sector could fail to produce the hoped-for benefits unless action is taken ...
Consolidation of the IFA sector could fail to produce the hoped-for benefits unless action is taken to improve acquisition and merger processes warns Broker Exchange today.
The warning, coming just after stockbroker Durlacher said most IFAs will cease to be independent in the next three years, adds futher tension to the changes being wrought by new regulations.
Broker Exchange (BE) says M&A activity will not succeed unless senior executives put in far more time and work into the "people side" of the new organisations being created.
"The success of the venture will depend almost entirely on having the right people in the right positions, and doing the right job," says Sarah Ashman, BE founder.
"Every year, millions are spent on legal and accounting due diligence, but it's rare for any significant effort or planning to be put into managing different cultural and communication styles."
Companies that are managed effectively in this respect consistently outperform others, Ashman adds, generating faster revenue and greater profit growth as well as better shareholder value.
Staff, shareholders and clients will all suffer the consequences, Ashman adds, if the "people" issue is not taken in consideration, becuase the productivity of a merged company can fall by as much as 50% if staff teams do not gel.
"At the end of the day it is the people within the organisation who must implement the consolidation, merge the cultures and achieve the intended goals. But the people will either sabotage the success of the new organisation or they will unite and focus their attention, expertise and effort on the achievement of the goals of the new entity."
Support for BE's view comes from a recent study by PriceWaterhouseCoopers of 100 Blue Chip Companies and their unsuccessful or troubled mergers.
The research shows that 85% saw "differences in management style and practices" as a major part of the problem.
A study by the Harvard Business School found that organisations with strong teamwork did much better than those without, with share prices growing twelve times faster.
Moves to overweight equities and fixed income
The Big Interview: Focus on ethical investment
View from the front row
'No control or oversight'
359 new customers in 2018