5 Things Your FI Should Do to Prepare for a Merger or Acquisition

Mergers and acquisitions continue to be a dominant trend in the financial industry and, in fact, have been so in banking for decades. According to the Financial Brand article, Three Major Trends in Credit Union Mergers and Acquisitions (thefinancialbrand.com), FIs including smaller credit unions are eyeing M&A closer than ever in the current climate.

“Jim Perry, senior strategist for Market Insights, believes smaller credit unions will have to seriously consider mergers and acquisitions to remain competitive, arguing that consumers in the post-pandemic world are increasingly demanding improvements relating to digital channels, personalization and security and efficiency — all areas where smaller credit unions struggle, and can only tackle incrementally.” — thefinancialbrand.com

Sue Schmiedeler, project manager at Profit Resources Inc., highlighted five things FIs should do to prepare for the M&A process to help stem customer and employee attrition. All these steps take place after the hard work of negotiating a deal and signing on the dotted line. And they are vital to protecting — and even enhancing — the FI’s profitability in the near- and long-term. 

1.  Start planning as soon as the announcement is made. This is the time to begin building the internal “dream teams” that will be responsible for shepherding the organizations from the start to finish of consolidating two entities into one, Schmiedeler said. It’s important to form teams and committees to address all the various moving parts of an M&A. Set expectations up front, build in accountability and reporting milestones and set up a centralized planning/project repository.

  • Form project teams
    • Build a M&A team consisting of both merging institutions. Pick the best people for the job. They should be the “leaders” and “doers” of the FIs.
    • Build the right M&A teams, considering the size and type of institution (digital-focused, commercial, consumer).
  • Establish a governance, HR and marketing committee to help guide the overall M&A project effort across all project teams. 

2.  Communicate with employees. Communication with employees of both FIs is crucial to retaining the teams, their institutional knowledge and their customer relationships. Do not leave this piece of the M&A plan to chance.

  • Communicate early and often.
  • Keep teams updated.
  • Be transparent.
  • Add fun activities to build morale and keep spirits high. 

3.  Invest in client communications. Spend the necessary money on notifications to clients so they are well prepared for the changes ahead. The goal is to minimize as much attrition as possible by making the changes known and easy to incorporate into client routines. Confusion and distrust are the enemies of retaining loyalty during an M&A. 

  • Send multiple communications. Clients tend to discard mailings and emails without reading them. Sending multiple communications increases the chances they will be seen.
  • Develop communications that are clear and concise. Don’t be too wordy!
  •  Call out any new or enhanced functionality that clients will experience.
  • Don’t forget to redisclose for any account terms and conditions that are changing to avoid compliance violations.
  • Cover all the bases to ensure clients receive the communications. Utilize mail, email, website posting, online banking messaging, in-branch messaging, fliers and statement stuffers. Nothing is too much! 

4.  Have a plan for conversion weekend.

  • Beef up the call center. Consider hiring temporary employees to meet the needs.
  • Train, train, train – most calls throughout the M&A will be about online banking, mobile banking and debit cards. Be prepared.
  • Provide employees with talking points and tips/tools documents. 

5.  Don’t stop once the conversion weekend is over. Everything will not go perfectly and there will be unanticipated bumps in the road no matter how well the FI has planned. Leave space for continued efforts to help customers navigate the process of ordering new debit cards and converting their online banking habits. Accept that there will be data cleanup efforts and procedures to be rewritten.

Hiring a consultant like PRI to help manage M&A integration ensures that an organization has access to an external viewpoint, avoiding the tunnel vision and silos that can occur in the highly charged process of merging two FIs. Consultants can keep the process organized, offer expert industry guidance, communicate with vendors and act as a traffic director in complex situations.

In the next blog, we’ll discuss “Why Culture Matters During a Merger or Acquisition.” The “people factor” is a key aspect of successful M&A that requires its own thoughtful approach and careful attention.  

Further resources:

Tips and Best Practices for Managing a Project Part 1 – Profit Resources, Inc

Tips and Best Practices for Managing a Project Part 2 – Profit Resources, Inc

Profit Resources specializes in identifying profitability improvement areas for financial institutions through revenue growth, cost control, streamlining processes, and effective use of technology. Contact us to learn more about our personalized approach to propel growth and improve profitability.

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