Julius Baer's Commerzbank Deal Has Sweeping Changes in Asia

Julius Baer, Commerzbank, Luxembourg, T24, Temenos, IT

Julius Baer spent almost 70 million francs to buy Commerzbank's Luxembourg arm. The ulterior motive for the tiny deal, unremarkable at first glance, is only now unfolding amid hefty investments.

The Swiss private bank said in December 2015 it would buy Commerzbank in Luxembourg, which added a mere 4 billion euros to the nearly 300 billion francs that Baer managed at the time.

The deal, which closed three weeks ago, isn't like any deal that Baer has done before, when it acquired firms like Merrill Lynch's international operations mainly to add add assets, bulk up in growth regions, or snag key advisors.

Instead, the Commerzbank deal marks a key point in a major and costly IT overhaul for Baer that includes sweeping changes in Asia and Europe.

IT Renewal

In a process which began more than 18 months ago, Julius Baer is undergoing a much-needed renewal of its antiquated information technology platform. The bank chose T24, the flagship product of Geneva-based software provider Temenos, early last year

The real benefit of the Commerzbank Luxembourg acquisition is not the clients, assets or bankers: it is the IT platform the bank is already running, which is also T24. 

Europe, Asia Plans

The deal's closing comes as Julius Baer prepares to merge its Singapore and Hong Kong booking platforms in Asia under T24 – Project Platform Renewal – which is set for the first half of next year.

Baer plans to adapt Luxembourg's platform for paneuropean requirements, and migrate other European countries onto the same system. Switzerland follows in a much later phase, not expected before 2018.

Luxembourg Spearhead

Luxembourg will increasingly be Baer's spearhead for Europe, which is now run by Yves Robert-Charrue following a management shakeup last week. 

Robert-Charrue, a long-time associate of CEO Boris Collardi, will split his time between Luxembourg, Zurich and London, Baer said.

Baer's move into Luxembourg as a key cornerstone in Europe – a shift from Frankfurt – comes as the Grand Duchy vies for London's business following Brexit.

«Floor-Runners»

Of the 150 people acquired as part of the Luxembourg deal, 32 are IT staff who are versed in T24. 

It is expected that Baer will use the Commerzbank IT experts much as it did so-called «floor-runners,» a kind of traveling trouble-shooter, when it integrated Merrill Lynch's international operations.

Then, the bank sent dozens of runners – typically IT specialists, client advisors, or relationship support staff who are versed in the target platform – to Asia and other Merrill offices to smooth bumps in the road and reduce confusion and fallout on its business. 

«Devastated»

Much like the Merrill Lynch experience, the plan is to mitigate the risks linked to a sweeping change like the T24 migration represents for Baer by deploying the Commerzbank experts.

Commerzbank isn't the first time that Baer has tried to renew its IT by acquiring a bank with better technology. The bank made a much-publicized bid in 2011 to buy Basel-based rival Sarasin – and its much-lauded Avaloq software platform.

Collardi said he and his CFO, Dieter Enkelmann, were «devastated» when the deal fell through after Brazilian-Swiss private bank Safra swooped in to acquire Sarasin instead. The two began negotiating to acquire Merrill Lynch instead a few months later, the deal which immediately preceded Commerzbank.

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