In a last-minute rescue mission executed over a weekend, UBS agreed to complete the acquisition, and within ten days also decided to change the CEO bringing back veteran Sergio Ermotti to drive the integration.
One of the most important decisions that Ermotti had to make is how to select a leadership team capable of managing an integration process that involves over 120,000 people across the globe.
A well-established practice in large mergers and acquisitions (M&As) has been to select at least some executives from the target firm they are trying to take over to take a place in the top leadership team.
It is common belief that leaders already inside the organisation can facilitate the integration and protect valuable capabilities from being lost.
In addition to that, retaining or promoting them to the top team signals to the talent throughout the organisation that opportunities will exist also for the employees of the target firm in the combined company.
However, Ermotti took a radically different path, appointing only current members of the UBS leadership team or new members.
Only Ulrich Körner, the former CEO of Credit Suisse, will join the future executive team from Credit Suisse’s side.
Why did Ermotti choose such a radical departure from common practice?
The acquisition of Credit Suisse is not common in large-scale acquisitions.
It is a rescue mission for a company that has been deteriorating.
At the Swiss Media Forum in Lucerne, Ermotti pointed out it was "crystal clear, the situation hasn't developed in the last six weeks, but in the last six or seven years"
A rescue mission like this requires a fundamental departure from old practices and a full-blown transformation.
This explains why the acquired firm will be driven by the people, culture and DNA of UBS with little consideration for Credit Suisse.
The senior leadership of Credit Suisse is not viewed as an asset but mostly as a liability by UBS.
Even Ulrich Körner, the only future executive to come from Credit Suisse, has spent a large part of his career at UBS working as an Executive for Ermotti and therefore has his trust.
The choice that Ermotti has made guarantees that UBS will be in the driver’s seat and the resulting organisation will look a lot like a scaled-up UBS rather than a combination of the two firms.
It also ensures that the problems with the risk culture that have plagued Credit Suisse over the years are not likely to spill over into the new firm.
But like everything in life, this also comes at a price.
The very one-sided approach to the integration will make the retention of Credit Suisse talent very difficult and may well lead to a lost generation effect where many employees choose to leave.
It also carries the risk of a “us against them” effect, making it difficult for employees from both sides to develop mutual appreciation and effectively work together.
In the end, the valuable parts of Credit Suisse that should be retained may be destroyed as a consequence.
While the radical decision regarding the appointments at the top level can be explained with the dramatic situation that had built up, the new top team of the combined banks will be well advised to carefully look at the lower levels, identify the best talents for the new challenge and overall make sure that a balanced approach is followed.
Thomas Keil and Marianna Zangrillo are co-authors of The Next Leadership Team: How to Select, Build, and Optimise Your Top Team