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Making an M&A deal into a win-win

With countless pitfalls possible, institutions must stay focused on what’s important to better ensure a smooth integration.

Sep 22, 2022 / Marketing & Sales

A lot can go wrong after a bank acquisition, and this can create significant disruption for the employees, customers and communities of both institutions—not to mention the acquirer’s bottom line.

One of the biggest mistakes acquirers make is to overpay for the deal and then attempt to justify that overpayment by aggressively cutting costs. Acquisitions can also go wrong if there’s not enough effort to merge the organizational structures and cultures of the two companies, or if the due diligence is not rigorous enough.

“When any of these things are not aligned, the producers at the acquired institution leave and take with them the best customers,” says Tom Brown, CEO of Second Curve Capital in Radnor, Pennsylvania.

When announcing an acquisition, an institution needs to communicate carefully about what’s next. If it doesn’t, employees of the target institution will form their own narrative about what’s going to happen to their jobs, says Greyson Tuck, an attorney at Gerrish Smith Tuck PC in Memphis, Tennessee.

When acquirers meet with the seller’s employees, they should be as positive about the merger as they can, he says. They should be truthful, but not embellish. And after an acquisition closes, customers will want to see seamless integration of their accounts, so teams from each institution—representing all aspects of operations—should communicate regularly to ensure a smooth integration of their respective functions.

The $26 billion-asset Glacier Bancorp Inc. in Kalispell, Montana, has been acquiring institutions in the Mountain West for 25 years, and is now in eight states. Randy Chesler, president and CEO, says Glacier uses a consistent M&A evaluation process based on a strict set of financial metrics.

“We make reasonable assumptions and if an institution doesn’t fit, we don’t spend a lot of time trying to bend the numbers to make it fit,” Chesler says. “We buy a bank primarily based on how it’s performing today. We don’t believe we should pay for what we can bring to the table in the future.” In following this process, he says, “We have a simple goal—we don’t want to lose one good employee or one good customer.”

Once Glacier announces an acquisition, the company works with the other institution’s existing management to communicate to all of their employees, he says. “Good or bad, we want to let people know as soon as possible how they’re going to fit in going forward. We do that with kid gloves as much as possible.”

The company’s integration team comprises the same people who run operations for the conversion because they’re up to date on issues, which helps with effectiveness.

“We measure the success of an integration by earnings growth, as well as employee and customer retention,” Chesler says. “In addition, after every integration we analyze what went well and what we could do better. We try to learn from every integration how to make the next one a little bit better.”

Michael Daniels, president and CEO of the $7.3 billion-asset Nicolet Bankshares Inc. in Green Bay, Wisconsin, says integrations have both a hard deadline for its interdepartmental team to close and convert on the same weekend and a softer timeline for “getting people used to the difference in the way things worked at their former bank to how Nicolet gets things done.”

In addition to providing a booklet explaining Nicolet’s culture, the company also pairs each incoming employee with a “buddy” at Nicolet, Daniels says: “It’s not an executive of the company, but a peer. We tell them that they can have an honest conversation and that every question is a good one.”

The company is also clear that it will take care of the seller’s community by obtaining a list of past sponsorships and donations from the acquired bank and actively encouraging incoming employees to be Nicolet’s “face” in the community.

Daniels’ most important piece of advice to save headaches down the road: Acquirers should overcommunicate at every step of the deal. After each close, Nicolet’s management continues to share updates and positive stories about the new “normal.”

He says, “We believe that constant, focused communication helps ease the process from signing the deal to operating as one bank.”

Katie Kuehner-Hebert is a BAI contributing writer.

Learn how financial services organizations can prepare for and capitalize on M&A growth opportunities in the BAI Executive Report, “Bank M&A is here to stay”