With several years of merger experience now under their belts, many banks have developed expert teams of systems specialists that can quickly assess operational conversions with potential merger partners.
These teams play an important role when a bank is deciding whether to buy or be bought.
Team members are quick studies when considering a merger's potential impact; they can produce synopses of what the issues will be long before formal bids are submitted.
Analyses by these teams often guide the snap judgments and painful decisions required at a deal's outset.
The teams help determine how many employees to shed, how many branches to shutter, and which of the merging banks' technological systems and vendor relationships should be scrapped.
"Technology and operations planning and execution is a foundation of the merger's success," said Denis O'Leary, chief information officer at Chemical Banking Corp.
"It defines the new institution's ability to serve customers effectively, efficiently, and with minimal risks," he said.
Mr. O'Leary said employees at both Chemical and Chase Manhattan Corp. had begun working feverishly to select systems the minute a merger agreement was reached last August.
Chase and Chemical's merger, valued at $10 billion, will be completed April 1. Mr. O'Leary will be information chief at the post-merger bank, which will retain the Chase name.
"Large banks have technology and operations people participate as part of the acquisition team," said Lawrence A. "Ladd" Willis, an executive vice president at First Manhattan Consulting Group in New York.
Banks hold special places for in-house systems specialists on the acquisition team because they are the ones who "assess how quickly operations could be converted and what the potential economic impact might be," Mr. Willis said.
Experts said Chemical has undertaken an "acquire and conquer" approach to the merger, which typically means elimination of the target bank's array of systems and operations in favor of the buyer's.
This method is increasingly used, especially among institutions that have weathered many mergers. That's because big banks have seen enough to know what works and what doesn't, Mr. Willis said.
It's also a departure from the "best of breed" strategy used by Chemical during its merger with Manufacturers Hanover Corp. in 1992. This approach involved a deliberate systems evaluation and a selection process to choose the best system available.
But this strategy is fraught with complexities due to the extra linkages required among a multitude of applications. Experts said it could risk relationships with many retail and wholesale customers.
Peter Magnani, a spokesman for BankAmerica Corp., San Francisco, said its 1991 merger with Security Pacific Corp. was a classic example of the "acquire and conquer" approach.
Calling it faster and simpler, he said the strategy helped BankAmerica minimize the "disruptive nature" the merger could have taken.
Mr. Magnani claimed that BankAmerica achieved its targeted annual cost savings of $1.2 billion within two years.
Another example of the more dictatorial approach is Wells Fargo & Co.'s record $11.6 billion takeover of First Interstate Bancorp, Los Angeles.
The San Francisco-based bank's dogged pursuit of First Interstate demonstrated a high level of confidence in its due diligence efforts, said John Laurino, a managing director at Westport Consulting Group, Westport, Conn.
"Wells Fargo didn't make an offer for First Interstate without having a precise idea of how much savings they could squeeze out of the bank from the distribution and operations side," he said.
Although outside technology consultants play some role in bank mergers, the real winners may be third-party service providers like Alltel Information Services Inc., Little Rock, Ark.; Electronic Data Systems Corp., Plano, Tex., and M&I Data Services Inc., Milwaukee.
William Bradway, an analyst at the Tower Group, a Wellesley, Mass.-based consultancy, noted that NationsBank Corp. had hired Alltel to modify its products to the Charlotte, N.C., bank's specifications.
The software will be used to help the bank with a backlog of pending consolidations, he said.
Mr. Laurino added that acquisition-hungry banks of all sizes are leaning more on service bureaus for specific business lines such as credit card, trust, and securities processing.
"You also see that happening for core applications support," Mr. Laurino said. NationsBank, Chemical, and Cleveland-based KeyCorp "have outsourced essentially all of the maintenance and development of their retail platforms," he added.
