Inner City Press: Background Document re Fleet-BankBoston

[Editor's / Webmaster's note:  The document below is a Fleet - BankBoston "Merger Update" Memo Inner City Press has just obtained.  It, and the anticompetitive merger, are analyzed on ICP's Fleet-BankBoston page.  Below is the Fleet memo itself].



For Internal Use Only

Merger Update is prepared by the Merger Integration Communications Team for all employees of both Fleet and BankBoston.

In This Issue

Glossary of Terms


How to Make a Merger

Is there a recipe for success when merging the 9th-largest and 15th-largest banks in the United States? How will Fleet and BankBoston do what studies have shown the majority of merging banks have not been able to accomplish - reach their stated savings and earnings performance goals?

Drawing on their own and others' merger experiences, managers overseeing the creation of Fleet Boston Corporation know the right ingredients to use and the processes to follow. They have started mobilizing both banks in a long-term process designed to ensure that the merger reaches all its objectives, ambitious and complex as they are.

An Almost $1 Billion Opportunity

Based on due diligence and preliminary projections of the new company's performance, Fleet and BankBoston have identified an almost $1 billion opportunity: $600 million in cost savings through consolidation and $350 million through divestiture.

In the next 18 months, a realization of these opportunities must be delivered to shareholders and to Wall Street if we are to call this merger a success.

Collaborative Teams

A Merger Integration Office staffed by both Fleet and BankBoston managers with expertise in the key disciplines involved - mergers, organizational structure and dynamics, strategic planning, risk management, and so on - have laid out objectives, a process, and a timetable for accomplishing merger goals. The work will be carried out by 66 integration teams of employees from both banks working within the business or staff areas to be merged.

These "I-Teams" - short for Line of Business/Staff Area Merger Integration Teams (see Merger Update Issue 2, dated May 13) - are supported by 10 Cross-Functional Teams of employees from both banks. The full-time responsibility of these Cross-Functional Teams is providing staff support to business lines and staff groups in both organizations. These 10 teams cover the areas of Communications, Divestiture, Facilities, Finance, Human Resources, Legal, Marketing, Revenue, Risk Management, and Systems & Operations.

One Step at a Time

The merger integration process will proceed in five steps. (Some of the terms that follow may be unfamiliar; they are explained in the glossary) Step 1 includes many elements, all of which will enable the I-Teams to get a thorough understanding of the Fleet and BankBoston organizations.

The Steps of Merger Integration

Step 1: Understand the Current State 5/17/99 _ 6/17/99*

Understand the current Fleet and BankBoston baseline organizations: functions performed, business models, volumes, budgets,and overall  strategies

Understand primary job functions

Complete Transfers In/Transfers Out (to ensure appropriate functional alignment)

Confirm financial baselines

Step 2: Develop the End-State Organization and Financials 6/18/99 _ 8/15/99*

Step 3: Obtain Approval of End-State Design and Operating Models 8/16/99 _ 8/30/99*

Step 4: Complete Selection Processes 8/31/99 _ 12/31/99*

Step 5: Implementation 9/1/99 +*

*dates subject to change

More about Step 1

We are now in Step 1, when the primary goal is to obtain a clear and objective understanding of both organizations' current states through careful measurement and analysis. For instance, what is each department's

overall organizational structure and what are the specific functions within each structure? How many people are devoted to each particular task or function? How much revenue do they generate? How many customers do they support? How much do they incur in expenses? And so on.

Managers have been asked to chart their current organizations by functional title. The Merger Integration Office (MIO) stresses that a goal of Step 1 is to describe both organizations based on what is done, not who does it.

It's characterized as focusing on the "boxes" on an organizational chart, not the individuals who fill them.

During Step 1, each position will be assigned a Work Classification code based on the primary job function. Work Classification identifies common job functions in both organizations based on the primary activities performed by employees, i.e., administrative support, direct sales, strategic planning. This helps to identify similarities and differences between the banks in their operating and staffing models.

Job Mapping is another exercise performed by the I-Teams. This makes it possible to amend the job titles on organizational charts so that similar functions and therefore the jobs held by employees, both within and across organizations, are described using the same language.

Aligning the Organization

Another key component of Step 1 is the Transfer In/Transfer Out process. This ensures that the organizations of the two banks are functionally aligned, meaning that individuals or groups performing the same functions are part of the same division. For example, at Fleet, Department X is part of a line of business. At BankBoston, it's part of a staff, or support, function. Where will it reside in the new company?

Department managers are beginning discussions about redrawing organizational charts. In some cases, all or part of a department may be "transferred," including its positions, expenses, and fee or revenue income. This is essential for setting financial goals and expectations for the new company. Of course, alignments cannot actually take place until the legal closing. In the meantime, they are theoretical.

The results of this Transfer In/Transfer Out exercise will help to determine the organizational structure of FleetBoston, which is designed during Step 2.

Transfer of a function does not determine the final business model that will apply to it. During Step 2, decisions will be made about business models, including such factors as reporting structure, systems, siting, reliance on outsourcing, and so on.

Other Cross-Functional Teams

The MIO and Human Resources and Finance Cross-Functional Teams are key in directing the work described above. Other cross-functional teams are also helping businesses to determine their current state.

The central element of the financial planning process is quantifying cost savings and revenue synergies in detail within both the current-state and end-state organizations. During Step 1, the I-Teams are confirming starting baselines for their individual units for both companies, based on 1999 budget plans. They are ensuring that the baseline fits the organizational design, and that employee headcount and finance information are correct.

The Finance Team supports and validates this work.

In addition, a separate Finance team has overall responsibility for working with the I-Teams to ensure that one-time, merger-related costs are identified, quantified, and accounted for.

The Systems and Operations team is collecting inventories of all 1999 systems and operational plans. Working with LOB/staff area managers, they are determining every application system that is being used at BankBoston and at Fleet, where the operations work is carried out, and taking inventory of all data center, network, and office automation hardware and software. They will use this information to determine the target systems, operations, configurations and sites.

The team is using key merger criteria to guide their decisions - what can be done most quickly, at the least expense, and with the least possible risk. This may mean, for example, that systems that are used the most, or that are technically the simplest, will be chosen as the target systems.

The Facilities Team is taking inventory of current site and occupancy states, planning for future site and occupancy requirements, and determining how to achieve cost savings targets and minimize costs related to occupancy.

In addition, a separate Divestiture Team is providing the I-Teams with information about the impact of the divestiture on their financial data and structure so that their end-state projections will be accurate after divestiture.

Looking ahead to Step 2

Step 1 lasts approximately one month, ending in mid-June. When it is done, the I-Teams will have a thorough understanding of the Fleet and BankBoston organizations. During Step 2, teams will use this current-state understanding to develop fully a recommendation for the desired end-state - the business, staffing, financial, and other models for the new Fleet Boston that will achieve the desired cost savings and create revenue synergies. Step 2 is expected to take two months. Recommendations emerging from it will be evaluated, amended as necessary, and approved by executive management. Actual implementation can start as soon as the legal closing takes place.


During the early stages of any merger integration, there are typically more questions than there are answers. In future issues, Merger Update will attempt to answer as many of them as possible. If the topic is of general interest, we'll do our best to provide an answer or, at the least, information about when a response will be available.

If you have questions about the merger that your manager has not been able to answer, please submit them to Merger Update.

For Internal Use Only

Merger Update is prepared by the Merger Integration Communications Team for all employees of both Fleet and BankBoston. Its purpose is to ensure that you are informed about the progress of the merger. The description in this issue of the steps for merging organizations does not fully apply to all subsidiaries.

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