Post-Merger Integration, Cost Reduction and Rationalisation

This case study covers how we helped turnaround losses of over £100 million per annum to profitability within a year, following the merger & integration of multiple dispersed business operations.

An international insurance business had made a series of large-scale acquisitions in the UK insurance market and was struggling to integrate the businesses successfully to create a single, integrated profitable business. Integrating large-scale businesses each with their own financial systems, processes and IT infrastructure is a substantial challenge. The absence of a single, integrated financial system can make financial control difficult due to lack of transparency with financial data and a dependence on cost allocations which may severely distort your measurement of profitability and business effectiveness by market, channel and customer.

The complexity of merged business operations can drive operating costs to an uncompetitive level. In service businesses, process complexity frequently translates itself into higher operating costs. With numerous IT systems, operating processes and procedures it can be extremely difficult to put effective cost reduction programmes in place.

We started with creating a clear understanding of where value was being created and destroyed across the business. By creating a financial and activity based process model with a customer & channel profitability assessment we could begin to help the leadership team understand where they had promising growth businesses, channels and customers, where there were value destroying markets, channels & customers which would be extremely difficult to turnaround and finally those business areas where a turnaround could possibly be achieved.

We helped reduce management expenses so that new business could be priced competitively. Competitive markets punish financial institutions severely whenever an attempt is made to operate unsustainable pricing. As business volumes are placed under pressure, it becomes harder to support your underlying cost structure with thinner business volumes. The only way out is to get “match fit” again, get management expenses under control and place pricing back again within a sustainable level within the “pricing/ value corridor” for your service offer.

The final result was to move a business that was losing over £100 million per annum to profitability with a year.