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Sep 12, 201912:56 PMOpen Mic

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Beyond the balance sheet: Tips for a successful merger

Businesses in nearly every industry have the potential to go through a merger or acquisition at some point in their life cycle. While there can sometimes be negative connotations associated with a merger or acquisition thanks to the uncertainty a change like this can bring, in reality the process can be a very positive experience and benefit all involved.

On May 31, State Bank of Cross Plains (SBCP) officially merged with Union Bank & Trust (UB&T), maintaining the SBCP name. We went from 10 branches in Dane County to 15 locations in three counties. There were no layoffs. In addition, we were able to add additional product lines — such as ag services and crop insurance — and grow assets to strengthen our lending base.

All of this required significant planning long before the actual merger and will continue long after the general public forgets about the announcement.

The key to a successful merger is to evaluate the benefits and drawbacks for all parties that have a stake in the transaction. A merger should:

  • Benefit both businesses economically by creating efficiencies, expanding markets, gaining expertise, acquiring technology, or adding products;
  • Benefit employees through growth opportunities and job security; and
  • Benefit customers by improving the product or service or creating new conveniences, such as more locations to serve an existing market better.

The value of shared values

Our bank has gone through this process before, and several key factors seem to repeat themselves each time regardless of the circumstances involved. Perhaps some of the lessons we’ve learned will help your business approach a merger or acquisition with the tools you need to benefit all involved.

  1. A similar culture is priceless. When you see a merger fail, the common denominator is almost always two corporate cultures that were just too different to combine effectively. In our case last spring, the leadership at the two banks had known and respected each other for years, which actually motivated UB&T to approach State Bank of Cross Plains to initiate the process when their family ownership team decided to sell and pursue other professional interests. However, it’s possible to uncover whether two businesses have similar cultures and value systems even if you don’t have that kind of history. Be deliberate about paying attention to factors beyond economic reasons for merging your organizations:
    1. Compare mission statements — Do your mission and values seem to line up? For example, SBCP has a strong commitment to volunteerism and community involvement. That might be difficult for employees who have never had that support and might feel like volunteering on a local board of directors or coaching a local soccer team is “just another duty or unrealistic expectation on top of a full workload.” Attitudes about core values matter. Employees are our most important asset. If the organization that you’re merging with has a contrary position, this will lead to difficulty post-merger.
    2. Examine basic operations — Do both organizations use formal procedures or a more casual approach to hiring, marketing, or interacting with customers and vendors? How many layers of management are involved in each department? For instance, some of our sales teams still report directly to senior management, and it could have been problematic if middle managers felt circumvented by that practice.
    3. Look at daily office life — Do employees dress up or prefer business casual? How do you celebrate special occasions, such as employee birthdays or work anniversaries?
    4. Ask to interview customers — Find out what customers like about working with each organization. What do they consider the company’s unique value that keeps the relationship strong? What would they like to see improved? I met with one of our long-time customers the other day who mentioned they like having direct access to our executive-level leaders and were glad to see that hadn’t changed after the merger.
    5. Look and listen beyond what is said — You’ve heard the adage: It’s not what you say, it’s how you say it. Consider things like body language, humor, and informal interactions. Organizations tend to have personalities that permeate all communications. You may not notice those cues unless you specifically look for them.
  2. Find the common “why.” Why is this merger good for each of the base groups mentioned above: the company ownership/leadership, the employees, and the customers? If any one group feels threatened by a merger, you risk failure. Do your due diligence about answering that question with equal importance for all your stakeholders BEFORE you take the leap. Then communicate the relevant “why” to each audience openly and often.
  3. Integrate personnel with compassion. There are always challenges when combining two full rosters of personnel, yet the people who make up your business should be treated like your greatest asset. How you handle overlapping positions or departments will set the tone for your entire merger. Some suggestions:
    1. Do a “big picture” review. This is a good time to look at your company structure as a whole and determine if all needs are being met effectively. Do you have the right number of front-line staff serving customers? Do you need to create a position to fill a role or a gap in service? Are people reporting to the right supervisor? Are functions in the right department? Create a company-wide map of all positions and functions and then plug the right people into the right “seats on the bus.”
    2. Look at strengths and skillsets rather than job titles. Sometimes employees will fit somewhere else and may even enjoy the growth opportunity of moving into a new role.
    3. Include employees in the process. They may have ideas you hadn’t considered. They may have goals you weren’t aware of. In addition, the more they know, the less they will “fill in” with their own fears.
  4. Communicate early and often with all groups involved. If you don’t put out enough information, people will fill in the blanks with their own stories. Companies tend to communicate fairly well with their leadership teams and stockholders. However, several key groups tend to get initial communication and then fall into an information vacuum: employees, customers, vendors, and the general public.
    1. Employees. Avoid excessive turnover by keeping employees in the loop regarding changes. Often, employees jump ship out of uncertainty. In our case, the bank president and CEO sent a weekly “Friday update” email every single Friday during the transition with information about what we were working on and where we were in the process. This happened even if there were no major changes. It opened a line of communication that encouraged questions and feedback.
    2. Customers. Again, customers can get antsy and flee to insert some sense of control. We gave regular updates via direct email and monthly newsletter articles. We also created a Frequently Asked Questions page on our website for easy access to news and information. It’s important to include information about what to expect and when to expect it, not just what has already happened. Check in frequently even if things haven’t changed yet. Most importantly, empower your customer-facing employees with enough information to answer the questions they receive daily. It instills confidence in that relationship.
    3. Vendors. Encourage your employees to be open with vendors. Their livelihood can depend on contracts and it’s unfair to surprise them with changes.
  5. Integrate systems and technology carefully. Plan, plan, and then plan some more. Converting systems and technology to a common platform is a major component for success and can go off the rails quickly if not given adequate attention. Much like integrating personnel, take this opportunity to map all your processes and look for gaps and efficiencies. Include training and communication in your technology plan.

Making mergers matter

Even if a merger or acquisition makes sense financially, it won’t be a true success unless the people affected benefit from the process. By looking beyond the balance sheet and recognizing your true assets — employees and customers — your merger can make a real difference in the communities you serve.

Kevin Piette is chief operating officer at State Bank of Cross Plains (SBCP). He sets direction for SBCP’s growth and infrastructure, prioritizing people in the bank’s corporate mission. You can reach him at KPiette@sbcp.bank.

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