Completing a holistic people due diligence which contributed to the decision to acquire another bank

Background



ISLAMIC Bank* was an investment bank niched in the Islamic market that was looking to expand its product and service offering to include retail and business banking solutions. The bank was seeking a more balanced portfolio in order to manage risk more effectively and to compete more dominantly in its sector. It already had a proven track record in the investment banking financial services sector.

They had identified and initiated discussions with a bank in the targeted sector, that presented an attractive opportunity for acquisition. ABC Bank was also an Islamic bank, with a broad customer base that had been in business for longer than ISLAMIC Bank and held a solid reputation in the retail and business banking market. A decision was taken to proceed with a due diligence on ABC Bank.

Change Systems was awarded the contract to conduct the people aspects of the overall due diligence. They quickly on-boarded a small team of HR, Organisational Development (OD) and Change Management specialists, who, using their combined expertise designed an integrated approach for the due diligence.

Approach

The due diligence required careful positioning and sensitisation with ABC Bank employees, which was an area that Change Systems provided guidance on. Some of the specific considerations which Change Systems needed to consider in planning the due diligence were:

 

  • The culture of ABC Bank and any possible areas for conflict with the ISLAMIC culture

  • Conditions of employment which were materially different from those at ISLAMIC Bank

  • Duplicated roles and responsibilities which in all likelihood would need to be streamlined

  • Critical skills and capabilities which would need to be safeguarded during the due diligence process so as to prevent valuable employees leaving ABC Bank

  • HR processes and systems being used by ABC Bank which would require integration with ISLAMIC Bank

    • Since other functional aspects of the due diligence were being undertaken simultaneously across ABC Bank (financial, product and services, legal, risk and operations), a decision was taken by the bank to be as transparent and open as possible with employees so as to minimise the impact of rumours and any resultant impact on productivity.

    Senior managers were provided with communication tools to explain the rationale behind the due diligence, approach that was going to be followed and what to expect. These tools included a list of frequently asked questions which Change Systems was instrumental in designing.

    The people component of the due diligence took approximately 12 weeks to complete. This included the design of the approach, undertaking the due diligence itself, and documenting the findings, conclusions and recommendations to ISLAMIC Management. The approach was a blend of desktop based investigation (HR policies, HR processes, organisational structures, job descriptions), interviews with key employees (HR management, HR specialists, HR administrators) and a gap analysis against the ISLAMIC people processes and practices.

    It was essential that Change Systems was well versed in the ISLAMIC people policies, processes and systems in order to understand what the potential gaps and opportunities were should the acquisition go ahead. Time was spent by the team immersing themselves in this information at the ISLAMIC Bank premises ahead of the due diligence design.

    Business results


    The due diligence was concluded on time and on budget and was regarded by the management of ISLAMIC Bank as providing a high level of quality information on the benefits and risks of acquisition from a people perspective. Feedback from ABC Bank was that the exercise was completed professionally and in a manner which facilitated overall trust for the process. 6 months following the due diligence a decision was taken and communicated in the marketplace that ISLAMIC Bank would be acquiring ABC Bank.

    The Change Systems value add

    Change Systems was successful in this project for the following reasons:

     

    • Their deep expertise and proven track record in the financial services sector

    • Their agility to quickly mobilise a blended team of people specialists to design a fit-for-purpose approach

    • Past experience consulting in diverse companies and cultures (UK, Africa and recently Asia)market

    • A deep understanding of transformational change, and the particular sensitivities which are associated with mergers and acquisitions

    • An ability to remain impartial and objective between ISLAMIC Bank and ABC Bank, thereby proposing recommendations which were factual and unbiased

    • Their time and results orientated approach