Mergers and Acquisitions: The RECS Case

RECS project developed out of the results of the merger of two particular insurance companies, in Quebec and Montreal. The merger occurred as a result of prospective potential for subsequent profitability among the two companies and a significant competitive advantage over the competition. However, the reality of the merger was causing issues for everyone involved. There were problems with customer service, meaning that the team members had to adequately deal with a range of skewed products and distribution networks from the systems at large.

Compatibility issues were the norm, particularly with the IT systems in use, which were inherited from a range of merged companies as there wasn't full integration and a host of skewed precuts and networks were derived from the old systems, all without the proper support structures in place to make them work at the highest levels of their abilities.

The compatibility issues presented more problems than many people even expected: for instance, as a result of the fact that most client files didn't receive full integration, employees have to provide service for clients that they didn't have full background and information for. This quickly created a situation which damaged the image of the company.

For example, as the case study reflects, "On a few occasions, our employees processed files that didn't belong to us, and conversely, we told some of our new customers that they didn't have a file with us. So we found ourselves in a state of confusion that was rather disconcerting" (Roy et al., 2006).

In these cases, the management had enough sense to realize that there needed to be a massive change, and one based on the present and immediate needs of the company at large -- a fundamental transformation of all work processes (Roy et al., 2006). Product lines were the previous and main means of distribution, with institutional, direct and group flows of processing being primary. Up to this point, TransInsurance Inc.

had generally just arranged all engagements in business according to product lines: institutional, direct and group, all led individually among account executives or particular teams around Canada. Prior to the merger, this method was sufficient at producing results which were satisfying, but once the merger occurred, this structure was no longer able to fulfill the more complex demands of the insurance world in the 2000s.

Two Main Objectives of RECS The overall goal of the RECS project was to restructure the customer service department as a whole and also engage in a certain level of marketing of insurance products in the arena of TransInsurance. The project was designed to help with the rearrangement of massive product lines within two major service centers: the call center which specialized with in-call and the claims management center.

The first phase of the project focused on the development of a customer service center and the rearrangement of a second-line service center so that there was access to better and more improved ranges of service offered to clients (Roy et al., 2006). The second project goal specialized in the yearly savings of $3 million dollars so that claims could be better optimized through the processing of superior methods and through the minimization of service requests.

This type of optimization would be focused most totally at the expertise and claims processing center and would warrant the specialization of staff members so that there could be a major reduction in staff members assigned to these issues (Roy et al., 2006). Factors and Failure with First RECS Attempt One of the major problems with the First RECS attempt revolved around the fact that InfoSmith made use of particular one-size-fits-all business models -- models which had worked effectively for past situations, but which weren't suitable for the present, particular issue.

The experts believed that these models could be applicable regardless, but this was correct only in theory. There simply wasn't enough appropriate effort on the part of management, and all projections were too long and too conservative. The most ideal method would have been to eliminate current processes and to transpose them without wasting more time. Other reasons for the failure were that the methods used generally upset team members of TransInsurance and clashed with the corporate culture. The clashes in corporate culture and in project management strategies.

One company was more enmeshed in a paternalistic culture, whereas the other was more of a hustler culture: thus one saw the other as too complacent or too enterprising and calculating. This simply created abundant dissatisfaction. Specific Strategies to Improve the First Attempt If one could go back in time and improve the first attempt, it would have been far better to open the channels of communication as fully and as thoroughly as possible.

A mediator/manager should have been present to acknowledge the difference in corporate culture and to work hard to establish some middle ground. These difference really should have been better acknowledged so that they could be addressed and adjusted and thus not act as impediments to corporate progress. Once a new mode of thinking and engaging in corporate culture is established, then it would be up to all parties involved to create collective goals and objectives to be met.

This would make all parties feel as though they were on the same team, and were working towards a more common interest. Channels for conflict resolution would need to be open as well, as it would have to be anticipated that misunderstandings, ruffled feathers, and miscommunications would be bound to occur. Exhibits Some of the most basic principles of balanced communication should have occurred in an effective and thorough manner.

All major players of the merger should have had to take a mandatory class on effective and balanced communication so that future conflicts can be avoided and so that a bright future can be properly forged. This leads to the need to examine the success and consequences of Mergers and Acquisitions in a whole new context, in terms of the independent and dependent variables. This can help all the major players better determine what they can and cannot control. (Figeurido, 2013).

Keeping these issues in mind along with some of the more standard problems that mergers run into when they first go forward are also important. Becoming appropriately informed of all of these issues is truly crucial to merger success. A failure to understand these common issues and to take action is precisely what led to the overall failure of the RECS project. This can be demonstrated in the following table. (Openlearningworld.com, 2011). Likewise, looking at the reason why particular mergers succeed vs. The reasons why certain mergers fail is.