Bank Marketing
Bank Mergers | Key activities to make the M&A deal successful.

Bank Mergers | Key activities to make the M&A deal successful.

One of the areas that we noted in our annual outlook in January was the fact that all signs were pointing to an anticipated increase in the number of bank mergers in 2016. While most of the deals announced to date have been relatively small due to increased regulatory scrutiny on readiness in larger institutions, there does seem to be a growing undercurrent of activity. This arguably is driven more on seller motivation than buyer strategy. Regardless of the drivers, it appears to be a good opportunity for smaller buyers to make hay while their much larger competitors deal with meeting the demands of regulators in preparation for their next move.

So the mixed environment (which seems to have a few years of runway left) creates the need for those who are in the position to buy to take stock of some internal factors and key activities prior to jumping on the merger bandwagon. Here are a few thoughts to consider going forward for a successful merger.

1. Ensure that as an acquiring bank, you have a solid understanding of your culture.

Much has been written about this topic and we have seen firsthand how conflicting cultures can create a challenging environment for a smooth employee and customer transition. It isn’t unreasonable for those on the acquired side to feel a sense of distrust and concern about how the “new bank” will be similar or dissimilar to what they have built. While mergers are still ultimately financial transactions, the human element has a real role in making the financial forecast come to life. By understanding your culture, you can quickly build a proactive communications model that addresses these concerns and establishes a mutually understood vision for the future.

2. Don’t ignore the M&A challenges presented from acquired bank customer data. 

While one of the most challenging aspects to pulling off a successful merger lies with the ability of customers to migrate seamlessly to the new bank, every merger comes with data migration issues. Core banking providers have a made a nice business out of de-conversions through templates and mapping processes – but this is almost exclusively focused on moving data from point A to point B.

There are a number of key activities involved in merger communication that can shed insights into these new customers even before the test files are loaded at the acquiring bank. Looking for strategic nuggets of information that are not uncovered during due diligence can be very enlightening earlier in the game – and beneficial to a successful M&A conversion.

3. For the right size M&A transaction, use the merger as a tool to get better.

It goes without saying that mergers are not full-time activities for smaller to mid-tier financial institutions. This causes a wide number of “new hats” to be handed out to key bank staff that are very likely overloaded even before a merger is announced. Often these new roles are outside of the experience zone, even for senior bank leaders, and require a degree of learning on the fly.

Despite this fact, well organized banks can utilize the M&A transition time to perform a level of self-assessment to fix things that may have been ignored over the years. Items like physical and digital asset management – branches, call centers and mobile capabilities, sales enablement and onboarding practices and overall marketing touchpoint frequency.

The key is not to necessarily fix these during the merger but to take stock of opportunities presented by the transaction. The acquiring bank isn’t always better than the acquired bank in each area of business. This is a good mindset to keep to facilitate possible adoption of new ideas – whether they are products or processes. No matter what you read or hear, there isn’t a single turnkey solution to ensure bank mergers run as smoothly as we would like. Much of the benefit comes from doing as much scenario planning as possible before the proverbial floodgates open. This provides a good foundation for adapting to the changes that will inevitably follow.

While most of the larger institutions are either prohibited from significant acquisitions or are looking for a green light to acquire again – they also have large budgets to think through much of the unique challenges presented in merger. This doesn’t mean banks of all sizes cannot demonstrate their ability to differentiate, particularly when you have a direct connection to your new market.

For more information on managing merger communications download BMM’s Bank Merger Marketing Best Practices.

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