The credit union merger process is relatively complex and needs careful management to ensure a successful outcome. Apart from the merger team that oversees the entire process, a number of subsidiary teams are needed, each handling a different aspect of the merger.
Up to seven discrete teams may be needed to conduct all aspects of a merger. The teams’ functions include strategic planning, initiating discussions with potential targets, conducting due diligence and managing integration of the merged credit union.
Strategic Growth Planning Team
As a precursor to any merger, this team evaluates the acquiring union’s strengths and weaknesses. They develop a comprehensive growth plan, taking into account other initiatives such as branching, new technology as well as opportunities for growth through the merger. Based on the assessment of the opportunities and threats confronting the credit union, the strategic plan identifies short- and long-term goals and potential target markets that will support credit union growth. Because of the strategic importance of this task team, members should include the CEO, board of directors, senior executives and several specialists including a merger advisor, market researcher, brand marketing advisor, technologist and an architect.
Merger Planning Team
Once the strategic growth plan is finalized, the supervisory merger team would establish a merger planning team comprising the CEO, senior executives, and a merger advisor. The team is tasked with developing an overall approach toward the merger and conducting a discovery planning session to evaluate the credit union’s merger value proposition. This facilitates the development of merger criteria, enables the listing of target credit unions that fit those criteria, and draws up proposals for deal point parameters for board approval. Finally, a presentation articulating the merger vision should be prepared so as to create a rational and emotional desire for a merger.
Having identified target credit unions and clarified criteria, the deal team will reach out to the CEOs of prospective merger targets and engage them in constructive discussions with a view to creating interest in the possibility of a merger. If the initial response is positive, provisional deal points may be negotiated. This small, high-level team usually consists of the CEO and merger advisor along with support from the Board Chair and Vice Chair on crucial issues.
Board Merger Advisory Committee
At this point, a small committee comprising two to four directors, the CEO, and the merger advisor participate in facilitated discussions with the CEO and board of directors of the target credit union. This committee provides input and considers key aspects of a proposed merger, such as deal terms and due diligence. The merger advisor plays a key role in keeping discussions on track. This committee reports to the board of directors and, in consultation, works toward agreement on a letter of intent and a definitive merger agreement. Due to the delicate nature of these discussions, total confidentiality is essential.
Due Diligence Team
Although credit unions have differing views on the scope and timing of due diligence, experience has shown that a two-step approach works best. The first step is a preliminary and confidential due diligence exercise that focuses on the identification of any key aspects that could be deal breakers. This is performed by a very small team of executives supported by an internal auditor, legal counsel, and an external accounting valuator. The initial findings go to the board of directors for a go or no-go decision.
Assuming a positive decision, a merger announcement is made, and this is followed a detailed operational due diligence exercise involving a larger team of executives and managers.
Integration Steering Committee`
This team, headed by the CEO or an executive vice president (EVP), is responsible for planning the integration of the two credit unions. It comprises senior executives from the acquiring credit union and select employees of the acquiree. However, if the merger was comprised of similarly-sized credit unions, it would most likely include a larger contingent of representatives from the acquiree. All key functional areas should be represented.
The integration team manages the integration of facilities, functions, and systems. Executives and functional managers of both credit unions will be members of this team, which is usually organized by functional area. Other members of this team include the merger advisor, legal counsel, and IT representatives. A merger technology platform can help streamline the process and provide improved customer facilities.
Managing the Merger Teams
A considered, careful approach to a credit union merger helps ensure merger success and minimizes disruption. The structure of the acquiring credit union’s merger team needs to take into account the necessity for the merger team to include key decision makers and appropriate advisors. The participation of these individuals ensures the merger team has the authority to conduct its business while also ensuring all legal, commercial and financial aspects are properly considered and that the merger is in everyone’s best interests.