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HOW DO YOU KNOW IF YOUR M&A HAS BEEN SUCCESSFUL?

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By Karen Thomas-Bland, Global Board Level Advisor and founder of Intelligent Transformation Partners.

 

Who couldn’t have been amazed by the tremendous efforts of Jeff Bezos and Richard Branson recently as they made their journeys into space, opening up new ground in commercial space travel? There are many parallels here to the global mergers and acquisitions (M&A) market which is also reaching record commercial highs. Global M&A activity hit an all-time high in the first six months of 2021, with deals worth more than US$2.6t (EY).  The parallels don’t end there – both have the significant preparation lead time, the dizzy highs of the launch and the sheer hard work which comes afterwards to make it work for everyone.

There are people much better placed than me to talk about why the M&A market is so hot – I will say it’s perhaps a combination of chief executives pursuing big deals they planned during the pandemic, private equity companies sitting on almost $1.6 trillion of uninvested cash (Prequin) and blank-cheque companies having raised record amounts this year. What’s more, the great heights of the M&A market are expected to continue to at least the end of the year.

But M&A deals don’t have the best track record of success – a bit like early space exploration.  Eighty three percent of mergers fail to boost shareholder value (KPMG) and 61% of acquisitions do not earn a sufficient return on the company’s investment (McKinsey).  Deals fail due to several reasons, the key ones being:

  • Inability to drive the expected synergies from the deal (e.g., Yahoo/Tumblror eBay/Skype).
  • Mass exodus of talent from the seller, most of the key talent/senior managers leave (e.g., Credit Suisse/Donaldson, Lufkin & Jenrette)
  • Inability to properly, deeply integrate two businesses that feel initially similar, but have different cultures, processes and ways of working, (e.g., Wendy’s/Arby’s)

So how do you ensure you are in the 17% of deals that boost shareholder value, the ultimate measure of M&A success? From experience of over 50 M&A deals and many post-merger integrations, there are several areas to measure and monitor to ensure your merger or acquisition is a success. I find that establishing an integration scorecard early on covering all aspects of the deal, for example, customer, employees, finance and systems can really help drive focus.

 

Minimise disruption to the customer base and create positive sentiment about the merge

Customers are known to defect in the face of uncertainty and competitors tend to strike when you are distracted. A good approach can be speaking to customers early on about the deal, outlining if and how it will impact them and how the change can help them to deliver greater value in their business. Having in place a clear and targeted customer retention strategy throughout also really helps.

Types of scorecard measures include:

  • What % of your own customers are you retaining?
  • What % of the acquired organisations customers are you retaining?
  • What is the customer sentiment on the merge?

 

Create an organisational culture to attract and retain top talent and key leaders

Like customers, top talent can get lured away by competitors when you are distracted. It’s important to understand the potential reasons that could lead people to leave. Early on I typically settle leadership roles quickly to identify who can then help stabilise the rest of the organisation. Figuring out the two cultures of the organisations and the extent to which to knit them together can help with winning the hearts and minds of both sets of employees.

Types of scorecard measures include:

  • Are you retaining the top talent/key leadership from the acquired organisation?
  • Are you attracting and retaining talent/key leaders to the combined organisation?
  • What is the employee sentiment on the merge?

 

Capture revenue and margin growth opportunities and realise cost synergies

Focusing the integration on the few critical issues that drive the value can really pay dividends. If sources of value and risk are not clearly prioritised early on, it can be a distraction for the organisation. The rigour around revenue synergies needs to be managed at the same level as cost synergies, along with monitoring and challenging investment costs to preserve net value.

Types of scorecard measures include:

  • What growth synergies are you achieving vs. the value case?
  • What cost synergies are you achieving vs. the value case?
  • Are you bringing the integration in on time and budget?

 

Put guardrails in place around changes to processes and systems

It’s important to define the contribution and role of technology and processes that need to change or be refined in the new business operating model. Developing IT integration principles, including prioritising initiatives that accelerate delivery of synergies across functions helps to drive focus. An issue which can occur if not well managed is the inability to balance support for the base business with process and integration efforts.

Types of scorecard measures include:

  • Is the combined IT infrastructure working seamlessly and securely?
  • Are processes clear and understood by all from day one?
  • Are customers and employees having a frictionless experience?

 

Measuring overall success

 It’s important to measure the success of the deal on how it has achieved the desired impact on the business and unlocked the opportunities as set out in the value case rather than activities completed, for example, ‘plans done and delivered’ or ‘systems integrated’. Monitoring the results closely and appointing someone whose specific role is to ‘keep the score’ can help.

I have found that measuring and monitoring these areas really maximises a company’s chances of realising the value case and increasing shareholder value – the ultimate measure of M&A success.

 

Business

Dissecting the expansion of online checkouts

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Daniel Kornitzer, Chief Business Development Officer

 

Card payments have long existed as the preferred payment method for online consumers. But in recent years we have begun to see a rise in the use of alternative payment methods. Although card payments continue to serve the majority, it is becoming increasingly clear that consumer preference is diverging rather than reaching a consensus. Across the globe local preferences have developed as eCommerce has grown, and across the global digital payments landscape card payments are being passed over for new ways to pay.

Alternative payment methods are on the rise as they address several of the hurdles which have prevented cards from achieving total rule over consumer preference for online payments. Here are four key reasons for this:

  1. Alternative methods offer a superior consumer experience, particularly when it comes to mCommerce. With the rise of new regulations such as Strong Customer Authentication and developments in Open Banking, alternative payment methods can be faster and easier to use for consumers.
  2. New payments methods such as crypto are growing in popularity thanks to a more attractive offering to consumers such as lower cross border payment fees.
  3. With the digitalisation of services forcing many customers to pay online for the first time and many experienced online shoppers looking for more secure ways to pay, the security of financial data is a major concern. Alternative payment methods can protect customer details by removing the need to share bank details at the checkout.
  4. Not all consumers have bank accounts or a debit card. By offering alternative payment methods businesses are enabling these customers to join the digital economy.

Daniel Kornitzer

Businesses have been watching these trends closely and are constantly looking to improve their checkout experience for consumers accordingly.

 

The impact of COVID-19 on online payments

The need for businesses to expand their online checkout to meet changing consumer expectations is not a new trend. However, it has certainly been accelerated by COVID-19. The majority of businesses agree the pandemic has shifted consumer payment preferences, with alternative payment methods gaining in popularity.

Research shows businesses have seen more alternative methods chosen at their online checkouts with a greater percentage of consumers choosing digital wallets (57%), mobile wallets (39%) and eCash (28%). This has caused businesses to reconsider the way they understand payments, looking beyond traditionally methods to newer consumer friendly alternatives. With this is mind, reports suggest more than 60% of businesses are now making improving their checkout a top priority to fulfil the new high standard of consumer expectations.

 

Businesses are actively expanding their online checkouts

If we compare data from 2020 to 2021 on the payment methods offered or planned to be offered by businesses in the next one to two years, the trend is clear.

The number of businesses not offering or not intending to offer alternative payment methods is falling, as more and more start to recognise the importance of offering choice at the checkout. In the last year alone the increase in the adoption of alternative payment methods has risen dramatically, particularly crypto and eCash. As businesses begin to understand the urgency of upgrading the checkout experience, it is clear that alternative payment methods will play a key role in making this a reality.

 

Establishing crypto as a key player

One of the most interesting areas of payments which businesses should be watching is crypto. Research shows businesses are already backing this trend with almost half considering adding crypto as an alternative payment method as an immediate priority, believing it will help them reach new markets, and more than 50% already have confidence in crypto as the future of payments.

 

Diversifying the checkout as a form of defence

As well as offering a better customer experience and reaching new markets, businesses are expanding their checkouts with alternative payment methods to combat other familiar problems.

Most businesses see their current levels of cart abandonment as an issue, with research showing almost half have experienced an increase in levels of abandonment at the checkout in 2021.  Businesses consider two of the most significant causes of this to be card declines and absence of the customers’ preferred payment method. Offering alternative payment methods is an effective way of tackling these problems at the checkout.

The rise of fraudulent transactions is also becoming a more pressing concern for businesses, with the number of fraudulent transactions increasing since the start of the pandemic. Diversifying the checkout with alternative payment methods can be used as a valuable strategy to lower fraudulent transactions.

 

Looking to the year ahead

2022 looks set to be another year where we will see businesses continue to adopt new payment methods at their online checkout in a bid to keep up with consumer expectations.

By working with a leading payments partner, businesses can benefit from access to a range of payment methods through a single API integration, allowing ambitious plans to become a reality in the year ahead.

All data from this article is taken from our recent research report Lost in Transaction: Finding competitive advantage at the checkout.

 

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How bug bounty programs can help financial institutions be more secure

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By

Rodolphe Harand, Managing Director at YesWeHack

 

Financial services have been one of the most heavily targeted industries by cybercriminals for several years. One alarming stat from the Boston Consulting Group found these firms to be 300x as likely as other companies to be targeted by cyberattacks.

Furthermore, the pandemic has led to a significant increase in the number of cyberattacks targeting financial institutions (FIs), with around 74% experiencing a spike in threats linked to COVID-19.

With FIs holding some of the largest collections of sensitive and private data, it’s clear they will remain an attractive target for malicious actors, especially as any data stolen can be used for fraudulent activities. This leads to the reputational damage of the financial entity that was compromised and has a knock-on effect in terms of monetary and reputational damage to affected customers.

For CISOs at FIs, the conundrum faced is how do you protect intellectual and customer data, and ensure accountability and transparency for clients and stakeholders, at a time when the pandemic has created budget constraints. Research from BAE Systems found that last year alone, IT security, cybercrime as well as fraud and risk departments had their budgets cut by a third.

Below we look at how bug bounty programs can help to address these pressing issues.

 

Protecting valuable data

Protecting customer and intellectual data has always been a top priority for FIs. However, as opportunistic cybercriminals have a lot to gain by stealing this valuable data, there is a constant evolution of threats, which means FIs must stay on their toes. By deploying a bug bounty program, FIs can work with ethical hackers that have a wealth of experience and unique skills when it comes to identifying security weaknesses within a FI’s defence, thus helping to implement effective security measures to help prevent data breaches.

Building trust among various stakeholders such as customers, suppliers and investors is critical for achieving business goals. By deploying a bug bounty program, FIs send out a message that they care about protecting the security of the data of those they work with – which in turn can have a cascading effect resulting in better business performance.

 

Improving accountability  

For FIs to win customers and keep them happy, amidst the growing threat of neo banks and customer-centric fintech organisations, speed of innovation is crucial. As such, many FIs have adopted an agile approach to build, test, and release software faster to bring online and mobile banking solutions to market quicker. However, this can create frictions between development and security teams. Security mandates are deemed to be unnecessarily intrusive and a cause of delayed application development and deployment.

Yet, with DevOps teams needing to build and deploy applications faster than ever before, an epidemic of insecure applications has emerged. According to Osterman Research, 81% of developers admit to knowingly releasing vulnerable applications, while research from WhiteSource found 73% of developers are forced to cut corners and sacrifice security over speed.

With developers often not having the time, tools, skills, or motivation to write impeccably secure code, there is an evident need to provide developers with more support when it comes to building applications securely Fortunately, bug bounty programs can provide a “fact-based” financial implication of inherent security flaws within the process. This makes it possible to hold development teams and service providers accountable for creating or delivering insecure products, thus addressing inherent security gaps within the business units and helping to drive continuous improvement.

Moreover, security awareness and education of developments teams can be improved significantly for those developers that are directly involved with the management of vulnerability reports for their bug bounty programs. This is because, the mere fact of exchanging information with ethical hackers, or assimilating the thinking of a potential hacker and having proof of concepts of vulnerability exploitation on their application components, naturally accelerates consideration of security early in the development stage and provides ongoing learning.

 

Get more return on your investment

According to Gartner, 30% of CISOs effectiveness will be directly measured on their ability to create value for the business. When security budgets are challenged, CISOs need to demonstrate business value through initiatives designed to enhance efficiency whilst stretching the dollar.

This is where bug bounties can help tremendously. Compared to conventional penetration testing, bug bounty offers a fast, complete, and measurable return on your security investment, with businesses only paying out for successful discovery of vulnerabilities. Equally, businesses get access to hundreds of ethical hackers that can test their programs, each with their own unique skillsets as opposed to only one skilled researcher testing the network. This results-driven model ensures you pay for the vulnerabilities that pose a threat to your organisation and not for the time or effort it took to find them.

Bug bounty programs also deliver rapid vulnerability discovery across multiple attack surfaces. With this approach, organisations receive prioritised vulnerabilities and real-time remediation advice throughout the process to accelerate the discovery of, and solution to vulnerabilities.

Another appeal of bug bounties is that due to the continuous nature of testing, more vulnerabilities are found over time as opposed to pen-testing. This is key to financial institutions that require agility to keep up with the continuous roll-out and updates of applications.

 

The cornerstone to a successful security programme

The risk posed to financial institutions by cyber threats will only continue, as evidenced by the number of data breaches seen in recent times. The COVID-19 pandemic has only exacerbated these risks, especially with almost all FIs having needed to shift to a remote working environment – which has only widened the attack landscape.

For FIs, a bug bounty program should be considered a fundamental cornerstone of any security strategy, with it being a modern-day cybersecurity solution that is well-equipped to tackle the immediate security challenges they face. In doing so, FIs will not only prove to customers and stakeholders their commitment to data protection and security but this will also be help them to avoid the monetary damages that could be imposed by regulators if a breach was to take place.

 

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