Uncovering Hidden Savings in the M&A Integration Process

Author: Ann Flynn, President & CEO, IQ Telecom

Publication: Connecticut Bankers Association Quarterly, March 2021.

This article explores the specific impact that M&As can have on telecommunication expenses in a world where the number of banks is shrinking, technology is advancing rapidly, customer acquisition is fiercely competitive, and remote work is a new norm.

A recent Lexology® article cited research done by investment advisor FJ Capital Management on banking mergers and acquisitions (M&As). It indicates that M&As will accelerate by mid-2021 and continue robustly for five years. This long period of bank M&A activity is likely to result in as much as 50% fewer banks in the US over the next decade. In addition, respondents weighing in on a Datasite® survey also expect M&A activity to increase in 2021. This research points to financial and real estate services that will accounts for 22% of this activity.  (See 2021 M&A Outlook infographic.)

The world has seen how the Covid-19 pandemic has reshaped our lives, affecting all industries. While recovery is expected, there are many variables, including governmental, technology, and health care, that will influence ongoing M&A activity. Domestically, under the new administration, we are likely to see more regulatory enforcement in the financial services industry.

Technological advances over the last few years have already changed the banking industry with banks moving away from traditional legacy phone systems to converged networks and implementing Voice over IP (VoIP) platforms. The overall goals are to reduce costs and improve efficiency with converged systems and more centralized support.

Business leaders navigating through an M&A processes typically look at efficiencies and overall cost savings. While they focus on reducing the cost of office space, staff expenses, and consolidating administrative functions, they can overlook voice and data expenditures as another opportunity to reduce expenses. The departments that mange IT services are typically not at the table during the planning process. While finance departments are responsible for paying these costs, they often do not have time, visibility and/or expertise on how to reduce these expenses across the organization as sites close and merge.

Facilities departments often manage physical locations, while IT and finance oversee technology, software, physical workstations, onsite and remote worker support. Connecting the expense to the facilities requires multiple departments working together to identify services, costs and the demographics of each location. Companies frequently lack this visibility into their costs and services that allow them to make the decisions about what to retain and what to eliminate. While downsizing sites and head count is typical in an M&A process, identifying and reducing telecom expenses is not. Accounts Payable (AP) often pays invoices without knowing what services are billed or what technology changes are being done.

Not unique to banking is the decentralization of vendors and staff that support IT services and/or telephone providers. Businesses with multiple sites often have the main office manage the data services for all remote locations, while field locations manage local voice services. This further complicates the challenge of wrapping your arms around this information across sites to determine how, or what, services and expenses can be adjusted and/or eliminated to support site changes. Therefore, visibility of services & costs becomes extremely valuable.

By the time a merger or acquisition is announced, the executive decision makers have discussed, established, and worked through a checklist of priorities for consolidations and cost saving opportunities. It is highly recommended that the management teams guiding the M&A process should ask, “How do we identify the voice/data services and systems across the organization with the goal of eliminating unused and unnecessary services to further reduce costs?” Another apt question is “How do we identify what we are paying for and what these services support?”  This all circles back to visibility. Accurate and thorough audits of inventory and expenses across all sites brings all of these services and costs front and center.

A typical telecom expense management (TEM) company manages processing invoices, creating payment files, and reporting on those expenses. Finance departments are then responsible for paying these on time and allocating expenses across the organization. Validating the accuracy and the necessity of the expenses is often not part of the payment process.

At IQ Telecom (IQT) we start with identifying and validating the services from each invoice, at every location before we ever move onto bill payment. We firmly believe that visibility into each cost incurred is crucial. We determine what services are in use at each location, and what business function they support. The process of identifying services no longer needed begins.  An inventory of services and costs is delivered to the customer so clear and accurate baselines are in place. This process results in savings of 15% on average of the overall telecom expenses.

As the banking industry shifts and changes due to technological advances and the game-changer Covid-19 pandemic, it must also be focused on market share and customer service. To attract and retain consumers, banking needs to be about availability and convenience which can directly influence decisions of where to locate offices and what services to offer at each location.

At the end of the day, it is all about supporting the customer as variables continue to fluctuate. It is, therefore, important for organizations to know what services they have and what they are paying for to identify what changes to make. This may sound like common sense, but: How do you know if you need to change technology and/or add services, if you do not know your inventory?  This is where visibility becomes key to identifying additional savings throughout the merger and/or acquisition processes which are designed to leverage technology, reduce costs, secure customers and increase market share.

About IQ Telecom (IQT)

For nearly 20 years, IQT has applied deep industry knowledge, developed effective processes, and created a robust management tool, IQ360°, to capture and organize volumes of data. IQT does not sell telecom services, nor are we affiliated with any providers or vendors. Our blended approach of expertise and technology allows us to provide unbiased recommendations and guidance to reduce costs and streamline processes. IQT has partnered with mid to large organizations to realize millions of dollars in savings resulting in trusted partnerships with our customers at thousands of locations.

The value and success of IQT’s “Best Practices” includes rigorous and detailed methodologies to identify all billable services and reduce costs. IQT‘s teams can help you far beyond a traditional TEM.

About the Author

Ann Flynn saw a need for holistic, location-based, inventory-centric telecom management, cost containment, and high-quality customer service. In response, she established IQ Telecom in 2001, a certified Woman-Owned Enterprise, and developed a proprietary telecom services solution, IQ360°. Ann has received accolades from enterprise clients for outstanding performance and numerous awards, including Women of Innovation.

Contact:  Ann Flynn, President & CEO | (o) 860.882.0500 | ann.flynn@iqt360.com