Submitted by : Smriti Vohra (MS18A045)

Martina Dubey (MS18A018)

Mahak Nuwal (MS18A017)
Priya Ramrakhiani (MS18A032)
Kumari Neha (MS18A014)
 Acquisition of BCAM (Banco Caja de Ahorros del Mediterráneo) by Banco Sabadell
(BS) for the symbolic price of one euro.

 People responsible for integration of new bank:

CEO : Miquel Montes
CTO : Federico Rodriguez
CIO : Carles Abarca

 According to the Chairman of banco Sabadell Josep Oliu , acquisition was of

strategic importance and the merger would generate €331 million in synergies from
2012 to 2014
 From 2003 to 2011 Banco Sabadell had grown through the mergers and acquisitions
(M&A) of seven banks in Spain and four in the United States.

 Replaced all IT infrastructures and systems of acquired banks with its core banking
platform (PROTEO) and IT-based competencies.

 Banco Sabadell would accounted for €166.5 billion in assets, becoming one of the
elite ‘systemic’ banks in Spain.
 Oliu had announced that BCAM must be integrated before the end of 2012
as it was essential to Spain’s economic infrastructure.
Analysts attending the press conference were sceptical about this acquisition
because:

 Banco Sabadell and BCAM were very similar in size (some 2.5 million customers)
 BCAM had a brand new core system
 BCAM’s risk portfolio was estimated at €24 billion (ibid) and analysts considered
that BancoSabadell had underestimated the risks involved in such a large
acquisition.
 BS was founded on 31st december 1881

 Between 1996 to 2011 with a total investment of €2 billion Banco Sabadell purchased NatWest
España, Banco Asturias,Banco Herrero, the Internet bank ActivoBank, and Banco Atlántico.
In 2011, it also acquired Banco Urquijo and Banco Guipuzcoano.

Banco Sabadell’s clientele:

Upper-middle-class individuals
Small- and medium-sized companies (SMEs)
Private banking users

BS went public in 2001 and joined the IBEX-35 index

 Expansion in loans to individuals and public administrative bodies (representing11.1% of
GDP in 2009) from 2005 to 2008(majority of which were used to finance infrastructure and
property operations)

The effect of European common currency :

 Fall in interest rates

 Increase in loans to property from 21% of total credits to the business community in 2002 to
41.8% in 2007
 The percentage of high risk loans increased among savings bank as well as other types of
banks
 Computers were introduced in Banco Sabadell in the 1970s in order to automate
administrative accounting, billing, payroll tasks, and the like.

 In the 1980s, Banco Sabadell and BCAM used a Bull mainframe , developed internally, to
run their primary applications.

 In 1998, Bull announced that it was discontinuing its mainframe technology.

 New platform called PROTEO(modular system architecture which shaped Banco
Sabadell’s business model) was launched.

 In 2000 Montes was hired by Oliu to lead this transformation;

 Rodriguez to manage the software development effort

 It involved 1,359,000 h in software development by a team of 900 people (including IBM

and Accenture analysts) and took 5 years (2000–2005).
It helped bank to divide product logic, services, and delivery channels into a manageable
number of discrete components
The PROTEO architecture was based on three IT subsystems

 Products and transactions (back office)

It the bank’s core products such as mortgages and loans
 Multichannel customer relationships (front office)
Multichannel or delivery subsystem :
The branch network ,Internet , automatic teller machines (ATMs),telephone
 Information analytics - business analytics through integrated management control system
(SCGI in Spanish)
 PROTEO had infrastructure and applications (both front and back office).
It allowed Banco Sabadell to radically alter its technological positioning

 For example, the bank gained the capacity to manage much more information about its
customers, adding high levels of efficiency in branch operations between 1999,before
PROTEO began, and 2006, when it was fully operational.
It comprises of software applications and other IT infrastructures in the form of services and
pay-as-you-go technology that can be accessed from anywhere and with any device.

Two deployment models for cloud computing services:

1. Public- with flash drives and unrestricted access for all potential users.

2. Private-restricted to users belonging to a single enterprise.

 Software as a service – Offering applications to users over a network without the need to
install and run the application on their own computers. Applications can be accessed via a
web browser.
 Infrastructure as a service – Offering storage, processing, and network capacities that are
paid for on a consumption basis and with access to a virtualized, highly scalable pool of IT
resources.
 Platform as a service – Offering a development environment and associated tools and
services to customers for them to develop and market their own applications and online
services.
Objective of the new governance model:

 Provide flexibility, since pricing is based on the real use of technology or ‘pay as you go’
 A reduction in customer barriers to technology
 Faster time to market for technology implementation
 Better control over expenditures such as web services, technical staff, and data centre
space.
 July 2005- Banco Sabadell signed a major, 10-year outsourcing contract with IBM worth
more than a €100 million.
 Banco Sabadell would receive IT services by means of contracts and service level
agreements.
 The model defines prices for the services rendered within the technological
infrastructure.
Role of Banco Sabadell:

 To maintain strategic management and control over the service.

Role of IBM:

 To provide the necessary resources to handle demands arising from infrastructure

management, maintenance, and program development.
Why it was needed:

 To address the issue of updating the PC environment, office automation servers, and
Windows which would affect approximately 400 platforms on which ‘critical applications
for the business are sometimes run.’

Objective of Orion:

 To reduce costs associated with managing the bank’s technological infrastructures by

45% in 4 years, including the purchase of new equipment.
In 2010,first phase of the cloud computing project consolidating IT infrastructures was
launched at two facilities (San Fruitós and Sant Cugat) :

 Banco Sabadell to apply a 12 to 1 ratio, thus saving 50m2 in space.

 Contingency plans were improved, enabling ‘close to 100%’ availability of services.
 Reduced the energy consumption of its IT equipment (between 80 and 85%) and reduced
CO2 emissions.
The office operations of Banco Sabadell were handled via the virtualized platform, served
centrally from two Data Processing Centers:

 A proprietary one located in Sant Fruitós

 The other provided by British Telecom.
 Each of the centers was capable of supporting 100% of the production, and the two acted
as backup centers, and allowing the changing of hardware while live.
 Users believed that they have all the computer power they need at their fingertips,but
with the advantage that this power is managed on demand.
 It also succeeded in eliminating all the problems related to equipment use because it was
then possible to procure new applications almost immediately.
 In 2007, Banco Sabadell signed an agreement with Hewlett Packard (HP) for a private
cloud of its mid-range platforms (complementary servers to mainframe which support
applications in Unix or Windows).
 In 2010, it expanded the contract to include cloud-based services giving it a superior
technological platform of higher performance.
 Renovation of technological infrastructures, improving services, and increasing
availability, while providing better response to contingencies.
 Providing the branch network with “thin client” workstations that would improve response
time, reduce energy cost and allow for a centralized control of branch applications.It
would offer a virtual desktop which would allow for total mobility.
 Technological support (Help Desk) and field service support to branches and corporate
centers.
 The need to manage different technological standards between the hardware
components, due to differing update speeds and technological cycles.
 Management of peaks in demand
 Development of backup processes
 Incorporation of redundancies to ensure runtime, security, and continuity
 The need to differentiate IT infrastructures between manufacturing and software
development.
Why it was needed:

 To have more flexible business models in its sales network.

 To have a central unit from which all online positions can be serviced from the branch
office employee to the ATM application, and including mobile sales points at any given
device.
 A large part of the infrastructure and applications were transferred to a service cloud.
 Mobile phone bandwidth continued to grow, and was expected to reach 1Gbps in 2015.
 Thin clients enable total mobility
 Improve response times
 Reduce energy costs
 Enable a centralized control of branch applications
 Had 939 offices and 3 million clients, €71.3 billion (some of 75% Banco Sabadell’s assets),
and employed 8000 people offering an efficiency ratio of 88%.
 BCAM was founded in 1875 and by 2010 had become one of the largest savings banks in
Spain, with heavy investments in property and tourism assets along the Spanish
Mediterranean coast and in other countries, particularly the Mexican Caribbean.
 To restructure Spanish savings banks, in 2010 the Bank of Spain approved the merger of
BCAM (which would own 40% of the new entity), Cajastur (40%), Caja de Extremadura
(11%), and Caja Cantabria (9%) by means of a process known as ‘cold fusion’ i.e. a
merger in which the various banks make joint decisions together.
 During the negotiations BCAM succeeded in positioning its corporate information
systems as the means to facilitate operational integration within the new bank.
 After an entire year of negotiations the general assemblies of Cajastur, Caja de
Extremadura, and Caja Cantabria voted against the merger.
 The Restructuring Fund for Banks (FROB) ordered an audit which subsequently detected
irregularities in BCAM management and hidden losses possibly reaching €4.6 billion (the
largest losses of any bank in Spain).
 On 28 September 2011, the Bank of Spain fired CAM’s CEO.
 Within CAM, analysts detected risks totaling €24 billion, principally for mortgages and
real estate financing to developers.
 The provisions already granted totalled €4 billion. Expected losses at the time of the
acquisition rose to €5.5 billion, and after deducting provisions, these losses totalled €1.5
billion.
 The bid was awarded to Banco Sabadell in December 2011 and the merger had to take
place before the end of 2012.
 The expected synergies were € 331 million from 2012 to 2014.Banco Sabadell
management expected to reduce the cost base by €247 million and the increase income
base by €84 million.
 The organization of the M&A was based on a Project office reporting to the board.
 Initially, the business of the acquired BCAM was ‘coordinated’ with Sabadell’s business
while technology had a hierarchical dependency to Sabadell’s technology team.
 The objective is to retain key people that know and run the systems, databases and other
critical components required to run the bank
 Covered up to 80% of the losses of a ring-fenced portfolio of €24.6 billion in assets as of
June 2011.
 Banco Sabadell would assume 20% of the potential losses, while the remaining 80% would
be assumed by the Spanish Deposit Guarantee Fund (FGD) with a 10-year liquidation
period.
 In addition, the Deposit Guarantee Fund would inject €5.2 billion (€2.8 billion already
promised in 2011 and €2.4 billion upon closing the transaction).
 BCAM’s activities were primarily focused on retail banking for individuals and SMEs while
Sabadell had a wealth-oriented commercial background.
 BCAM had a very loyal customer base, with more than 60% penetration in some towns
near Alicante.
 BCAM was acquiring customers when they were children.
 BCAM used the ‘virtual card’ which guarded privacy for the customer in e-commerce
buys, whereas Sabadell had only a debit card intended to do so.
 Expected to deliver one core platform and focus on profitable customers through
improved cross selling and business retention.
 The operating gap was covered
 A plan to migrate to Sabadell systems was drawn up
 Quality programmes were established to test the information
 A new back-office unit was set up in Alicante
 A branch network implementation plan was prepared
 At the IT infrastructure level, the bank needed to double its capacity from managing 2.5
million clients to 5 million.
 With the adjudication, BCAM’s 939 offices would be added to
BancoSabadell’s1340offices,with a total of 17,042 employees.
 BCAM operation should be leveraged by applying Banco Sabadell’s tried and tested M&A
to generate the required €331m in synergies.
 M&A was to be completed in less than one year.
 Sabadell would not stop or delay Banco Guipuzcoano’s acquisition: they needed to run in
parallel.
 Banco Sabadell planned to close 300 BCAM branches in 2012, without detailing the impact
on jobs.
 In cases when both banks had branch offices in the same area, Banco Sabadell would
decide which was more established.
 The bank offered redundant employees a special retirement program that was agreed
with the unions.
 Following the acquisition by Sabadell, staff of BCAM was highly motivated to get on board.
 Major issue was going to be keeping employees from the purchased bank motivated.
 Banco Sabadell’s systems team created a project office responsible for acquisitions.
 Integration projects were based on the ‘dossier’ method developed by Banco Sabadell.
 It consists of three phases:
 Dossier definition and preparation
 Development
 Trials.
 Each dossier has two managers, one from Sabadell and the other from the acquired bank;
both managers need to prepare for the merger’s impact in (1) commercial activities, (2)
bank’s operations, and (3) technology.
 Every dossier contain a script with questions to ask BCAM employees.
 These scripts lead to precise descriptions of every operational process, and detailed
action plans to cover the migration.
 The development phase in this phase included process, procedures, and data migration
from the old to the new systems.
 The third phase would end with the final date for download and upload into the Sabadell
systems.
 A vast majority of PCs and ATMs at BCAM were obsolete.
 BCAM had invested in a new system, but branch office infrastructures were outdated.
 Abarca thought of implementing an integration project between the data processing
centers of Banco Sabadell and BCAM that would permit the creation of a ‘Private Cloud.’
 Its advantage would be the potential to repurpose information resources dedicated to the
network of offices for other productive uses outside of normal working hours.
 Virtualization also applied to the bank’s network of ATM machines since they were very
important at BCAM.
 In 2012, Abarca replaced approximately 1000 PCs out of the 8000 in the branch network.
The aim was to provide central service computing in all the branch offices during 2012.
 Data management and safety measures are centralized. The new terminals do not store
any local information, so no protection is needed.
 There were savings in the supplier contracts, in line with the new terminal life cycles.
 Not all management agreed on its deployment without testing migration costs, such as
application testing and application redevelopment, and other application-specific issues.
 The solution for mobile devices became independent.
 Montes, Rodriguez, and Abarca were at BCAM auditorium, where some 500 people were
waiting and listening for the initial plan to integrate BCAM.
 For Montes and his team, the priority was to carefully communicate the reasons and
advantages of the defined strategy that prompted the migration.
 Montes reviewed his thoughts:
 How to keep people motivated and retain key personnel.
 Should Banco Sabadell staff integrate BCAM’s current IT assets, including its brand new
and renovated core banking application? Or apply its well proven strategy of substitution?
 How could Banco Sabadell leverage its cloud computing strategy into BCAM