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NO HOSTILE TAKEOVER

By Guy Tweedale, regional VP at Rocket Software

 

Companies need to be mindful that mergers and acquisitions (M&A) can evoke a certain feeling of uneasiness amongst customers. There are concerns about job-losses, changes beyond recognition of a beloved company, and of course, the fear that the standard of service or products will decrease.

Over the years, we have gained a lot of experience through the process of acquiring other companies. Rocket’s core values begin and end with putting our customers and partners first, so it was always essential to demonstrate to them their continued trust in us is justified. In our case, developing and delivering even more solutions, was at the forefront of any deal, as was handling the process with care to ensure that the outcomes for customers lived up to the promise. Below are some of the points that we’ve learned along the way, both from our own experience and from those of other organisations.

 

Company culture

Companies are their own “worlds” and have their own set of cultural norms, values and traditions. As we all know from visiting other countries, trying to impose our own culture on the locals is rarely well-received. When a company is acquiring or merging with another, it is important to be aware that the microcosmos that is a company cannot and should not be forcefully changed. Company culture has often been honed and tended for many years, and when done well, brings a plethora of positive effects on employees, including a strong sense of belonging which in return increases health and well-being.

Furthermore, discussions around merging two different cultures need to happen. This is not supposed to be an invasion. Instead, throughout negotiations, both parties need to agree on which core elements to keep. Once decided, the culture needs to be committed to and effectively managed. If merger or acquisition is successful, a company will emerge looking strong and unified, which is reassuring to the customers. Any failure to understand the other business can result in a marketing mess, like Quaker Oats’ acquisition of soft drinks firm Snapple,  where a failure on Quaker Oats’ part to fully understand the values of the company it was acquiring had disastrous financial consequences.

 

What the customer wants

Mergers and acquisitions need to make sense to customers. Not understanding customer needs, or the market of the other party, is a sure-fire way of losing business. While there is the potential to transform two businesses for the better, it’s essential to hang on to that one thing customers were drawn to in the first place. If you lose that, you’ll lose the customers too. This was the case when Google acquired popular phone and tablet maker Motorola in 2011 to develop top-tier mobile devices. The merger resulted in Motorola nose-diving and releasing a series of underwhelming phones, as well as a broken promise to upgrade older phones to the latest Android OS, landing this M&A on worst merger lists ever since. Knowing your client base and the problems they need solving is what truly matters.

 

Merging acquired IT systems

The integration of technology is another factor that needs to be taken into consideration. In most cases, each of the organisations involved will have a whole range of IT systems, many of which may be bespoke solutions developed in-house. Joining the dots not only between the various applications but between a variety of different customer databases can take years. If you’re trying to persuade customers that your merger or acquisition will streamline processes for them, you don’t want them receiving disconnected communications from you simply because you have records for them in three different databases which have no idea that they are the same person. IT integration needs to go very high on the list of priorities – you should be thinking about it already in the due diligence stage of the process before you take the plunge.

 

A new direction

Deloitte’s 2019 M&A report which surveyed 1,000 executives at corporations and private equity firms about deal activity, indicates that acquiring a larger customer base is increasingly a key motivator for corporations considering mergers or acquisitions, as much as expanding and diversifying products and services. This makes the challenge of integrating new customer databases even more urgent, but it appears that on the whole, we are doing a good job in the tech industry. 70% of customers see tech M&As as a positive development according to a study by PwC. A further 58% agree that capabilities improved after an M&A – industry consolidation (e.g. a single interface) and having to deal with fewer vendors are just two of many factors that speak in favour of companies ‘getting together’.

 

Meshing for success

Nobody ever said that mergers and acquisitions are a walk in the park. But when companies are performing due diligence to make the IT infrastructure work, and are being mindful of their customers, two can become one, successfully. Of course, the occasional acquisition of an industry rival does happen to eliminate the competition, but the benefits reach a lot further than that. Aiming for growth and pooling capabilities and talent together can ultimately provide customers with a better product and service.   

Looking at our own history, Rocket Software has significantly grown through acquisition putting us in a position from which we are able to continuously improve our products and services. As the industry moves forward at speed, so can we, thanks to meshing our competencies with those of other strong players. It’s a very simple equation – (even) better together.    

 

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IS PRIVATE PLACEMENT LIFE INSURANCE THE PERFECT PRODUCT FOR GLOBAL HNW FAMILIES

INSURANCE

By Louis Zuckerbraun, Managing Director, GMG Insurance 

 

Everyone wants to know that their family will be okay after they die and will do whatever they can to ensure that. That’s as true for high net-worth individuals (HNWIs) as it is for anyone else. But in an age where families are spread across the globe, leaving the kind of legacy you want can be incredibly complicated.

One product that could make things a great deal more simple is Private Placement Life Insurance (PPLI).

Originally conceived in the US, PPLI is rapidly gaining traction across Europe. Not only is it more efficient than traditional forms of life insurance, allowing the investments within the policy to hold many more types of assets and asset classes, it can also be a useful way to overcome specific issues such as management and control, beneficial ownership and substance.

 

PPLI explained 

While PPLI is gaining popularity across the globe, it’s still a relatively unknown product set, even among the HNWIs it would most benefit. It’s therefore worth looking at exactly what PPLI is.

Effectively an investment wrapped inside an insurance policy, a PPLI policy’s cash value depends on the performance of the investments within it. These investments can include hedge funds, mutual funds, and other potentially lucrative assets. Ultimately, it’s down to the policyholder to choose what kinds of investment they’d most like to have, meaning that they have a lot more freedom than they would with an ordinary life insurance policy.

Depending on the jurisdiction, a PPLI policy can also provide significant tax savings. In the US, for instance, the Internal Revenue Code treats insurance differently than it does investments. So, by packing an otherwise taxable investment in a tax- free policy, investors can reap big rewards on the investment, as well as the death benefit, tax-free.

 

Going global 

But PPLI policies aren’t just beneficial from a tax perspective, they’re also useful for anyone with a global family.

A PPLI policy is generally by nature a globally focused vehicle. So, for instance, approved banking partners and advisors in Switzerland can work with US persons, to provide an investment vehicle that has a global focus.

The policy would purchase global funds and be managed by a global advisor who is outside the US but understands the US market. This makes it perfect for anyone who wants to diversify from traditional United States Dollar denominated investments but wants to maintain tax compliance and work with international advisors.

This solution works very well with a global family who may have, as an example, a child studying in London, or with international businesses, and who wish to build exposure globally in a tax efficient and US compliant manner.  An international PPLI policy would be very beneficial to the family.

Further, the policy can be denominated in Swiss Francs, US Dollars or Euros depending on the needs and strategies of the policy owners or beneficiaries and still pay tax efficiently to the US persons.

These features also mean that a PPLI policy can be a useful replacement for, or supplement to,  a family trust, especially if a tax authority is unlikely to accept the trustees as the legal owner of the assets held in the trust.

 

A clear choice 

With more and more families living in different geographies, a PPLI policy is therefore an option that should be playing a much bigger role in the mainstream. It provides an accepted and compliant solution to the planning challenges faced by ultra-high net worth and high net worth families.

While life insurance, in general, provides a mechanism for estate tax planning, asset protection and investment flexibility that cannot be beaten by any other compliant tool,  PPLI provides the flexibility and protection that informed high net worth families increasingly require.

If you’re looking a purchasing a PPLI policy, however, it must be managed by professional insurance and legal advisors who understand the product.

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FINTECH IN AFRICA: WHY THIS MUSTN’T BE A DECADE OF WASTED POTENTIAL

FINTECH

Albert Maasland, Chief Executive Officer at Crown Agents Bank

 The current COVID-19 pandemic is an unprecedented crisis of our times. As with many global disasters, emerging and frontier markets are likely to feel a devastating impact. The Institute of International Finance has already reported the largest capital outflow from emerging markets ever recorded. The extent of the effect is being debated, but efforts to reduce the impact must become an absolute priority.

One of the most important things we can do in the long term is remember how far these regions have come in the last few years and remind international players of their enormous potential. In 2019, technology startups that operate on the continent received a total of $1.3 billion in funding. Investors and financial services players alike have observed the considerable growth and adoption of fintech in Africa.  Fintech is one sector that could show resilience during this crisis, as online services become essential and the use of cash is discouraged worldwide. Africa has seen its fintech industry develop and thrive of late and this must not be overlooked as we look to the future.

 

The fintech ‘hub’bub

According to the GSMA, Sub-Saharan Africa is still the “enduring epicenter of mobile money”. The region accounted for over 60% of the $690 billion that was transacted via mobile money in 2019 and has more than 150 million more registered accounts than the next highest region, South Asia.

The market conditions that make Sub-Saharan Africa so ripe for the adoption of mobile money range from the population being predominantly young and tech-savvy to an established history of not having sufficient financial infrastructure. Mobile wallets have brought better security and the ability to make international payments to the unbanked. Investors noticed.

Fintech became Africa’s best funded startup sector in 2019 as venture capital aimed to support and capitalise on the huge potential for growth. Visa, Worldpay and Mastercard are among those global financial players who have entered into collaborations with African fintech ventures, such as B2B payments company Flutterwave.

While Kenya saw the birth of M-Pesa, more countries are embracing fintech and becoming hubs on the continent. Nigeria saw the highest number of startup deals last year and startup investment grew nearly five fold compared to 2018.

E-commerce, financial products for SMEs and payments technology are among the areas receiving funding. As entrepreneurialism receives more support and international attention in Africa, the gaps in financial systems are being plugged.

 

Changing the definition

With all these developments and emerging services, traditional measurements of financial inclusion have needed to adapt. Financial inclusion metrics have previously been based on the number of adults with a bank account at a financial institution. According to the Global Findex from the World Bank, the share of adults with an account at a financial institution rose by 4 percentage points from 2014-2017, while those with a mobile money account nearly doubled—to 21%.

Mobile money accounts or mobile wallets are now a fundamental part of financial services in Africa. For investors and entrepreneurs, that translates to more information about the market, behavioural data about consumers and e-commerce possibilities. In essence, it amounts to opportunity.

These benefits also become apparent in international aid and charity work. It’s easier than ever for international development organisations to get funds directly to their aid workers and to individuals who need them safely. Remittances last year, which reached $550 billion, were three times that of official global aid volumes. 80% of these transactions were made to emerging markets, and the minutes and pennies saved in each transaction through the efficiency of mobile payments are invaluable to those most in need of these funds.

As financial inclusion makes great strides and financial technology has transformed the African startup landscape, we must not lose this progress. We must continue to value the benefits in bringing those excluded into the financial ecosystem and the unique opportunities presented in areas like Sub-Saharan Africa.

 

Looking forward

We’ve seen what real innovation looks like in the tangible changes fintech has had in Africa: doing things differently and creatively to improve the status quo. Investors should continue to watch and support these markets, and the financial services industry more widely should take heed of the lessons learned in the markets we too often believe to be behind us.

In the coming months, the importance of digital services and fintech in particular will become more palpable. Nigeria’s tech scene is already beginning to contribute to efforts to combat the COVID-19 pandemic. Africa was poised for an impressive decade and we must do what we can to remember and realise the potential of the world’s youngest population.

 

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