If businesses merge to achieve efficiencies and become more effective, why should regulators not take advantage of the same potential remedy?
The question is largely academic now that N2 looms and that, to all intents and purposes, we have already entered the new age of a single financial regulator. But it is still worth taking a look at the principal opportunities and dangers that have to be faced up to when organisations meld if only because nowadays it seems to be turning into quite the fashionable thing to do.
Latterly, Autif and the Fund Managers' Association have made no secret of their desire to pool their resources and, pending the final go-ahead from each of the association's members, work is well under way to achieving a new combined trade body. But according to recent articles in the press, it appears that bankers and insurers, in the spirit of “we're all bancassurers now”, are also starting to consider the possible benefits of being represented by a single trade association.
Turf wars aside, the scenario of the aggressive take-over remains pretty well in the commercial domain. So, for the purposes of this article, let us concentrate on the courtship of willing, albeit, perhaps initially, shy partners.
For the more cautious, there are certainly less dem-anding, potentially less painful interim options before a “point of no return” full merger, better communication and joint ventures being the most obvious, but in some cases, it takes a merger for real benefits to filter through.
An overall reduction in costs and an improvement in productivity are the normal clarion calls justifying a merger proposal. But greater efficiency and enhanced effectiveness in theory can often diminish in value when translated into practice. Bigger does not necessarily mean better, especially if bigger scale results in excessive bureaucracy. All organisations need to remain flexible if they are going to be effective.
Those in favour of a merger may argue that the decision to go ahead is a no-brainer but there has to be an awareness of and an ability to address and manage the counter-balancing dangers (which will in the long term determine whether the move had genuine merit) where the real attention needs to be focused.
The bigger an organisation becomes, the greater its potential insensitivity to the market in which it operates – that includes clients, members and the regulated. It is for this reason that it becomes more likely that niches proliferate and fragmentation occurs. This in itself helps to create opportunities but indirectly and for others, not the original parties involved in the merger.
Pleasing everyone all the time is impossible and even some of the time can be pretty difficult but if companies, trade associations and regulators are to deliver what is expected of them, they must recognise that their own interests may not be pursued without considerable regard for those whose lives they affect.
Powerful organisations are often accused of excessive bureaucracy, intransigence and complacency. However, customers and clients are fighting back. Shaken out of their apathy, they are increasingly rejecting the shabby services or shoddy goods that they have been obliged to tolerate in the past, voting with their feet and taking their business elsewhere.
Members of trade associations also retain the incontrovertible right to quit if they feel that their interests are inadequately represented. The lingering question is, therefore, what happens when an industry has only one regulator to turn to?
Anne McMeehan is director of communications at Autif