September 6, 2012
By Paul Seibert, vice president of finance, EHS Design
Today’s credit union operating environment is more complex and less forgiving than just 10 years ago. Increasing regulations, competition, customer product and delivery expectations, and profitability issues apply significant pressure on the operation.
At the same time, the current environment is providing significant opportunities to grow target market share as many big banks lose customers and small-to-large credit unions merge. Mergers can accelerate growth, enhance market penetration and provide a solid step into new markets.
Many elements impact the success of mergers, including how existing branches, headquarters, and leases are integrated into new omni-channel delivery and real estate strategies. Over the past 15 years, our team has worked with a number of credit unions and banks undertaking mergers and acquisitions. We have learned a lot about pitfalls and what creates success, particularly as it relates to branches and headquarters facilities—typically a credit union’s greatest fixed asset and second-highest operating expense. Based on our observations, there are three key points to consider:
- Merger preparation - Is your credit union ready to merge based on an honest assessment of your current condition and value? Do you have a realistic and strong vision of the future that will motivate another credit union to join your venture? Does the board understand the process and the art of the deal? Do they understand their role? What is your position on brand and the surviving entity? What is the situation concerning your core system and how will it support future growth? Are you ready for systems integration and what will be the impact? Does your management team have the expertise, bandwidth, and independence to do an honest assessment of current conditions and drive forward any required changes to position your credit union as the strongest and best choice?
- Branch network assessment - How will you merge divergent target member characteristics? Will your growth or delivery strategy change as a result of the merger? What will be the impact of technology on branch delivery? Are all branches properly located and sized to maximize market performance and efficiency, or should some be downsized, closed for redundancy, expanded, or relocated? Where are the positive and negative market overlaps? How does the expanded network support future growth? What should you retain, what should be sold, and what should be leased back to create the most productive real estate strategy?
- Headquarters assessment - Will it be most productive to retain both headquarters? What is the relative value of each property in terms of long-term occupancy potential, cost, brand image, and market efficiency with respect to staffing and resale value? Which functions should be centralized and which should not? What will be the most productive and efficient occupancy strategy for the next five, 10, 15, and 20 years?
There are many critical elements to consider in a merger. Branch and headquarters facilities are high on the list due to their impact on fixed assets, operating cost, brand image and experience, and orchestration of mixed-channel delivery. With a strong vision, accurate assessment, detailed preparation, and savvy follow-through, a credit union can take advantage of the many opportunities presented by current market conditions and potential mergers. The right merger at the right time can be one of the most effective growth strategies available, bringing ongoing benefits to both merged and surviving credit union members and staff.
Interested in Learning More?
Paul Seibert is the vice president of finance for EHS Design. Along with Chris Hamilton, principal at EHS Design, and Ken Seigman, partner at EHS Design, Seibert will lead a breakout session at the Northwest Credit Union Association (NWCUA) 2012 Convention and Annual Business Meeting entitled, “Mergers – Taking Advantage of the Branch Network and Headquarters Opportunities.” The session, scheduled for 2 p.m. on Thursday, Oct. 4, will include an examination of their “Zero Base” planning approach to creating branch network perfection, systems integration to drive accurate data analysis, building use and sales options, and how to apply “brand wrapping” to existing and merged facilities to deliver a consistent brand experience for members and staff.
In support of this strategy, the presenters will share their experiences preparing organizations for an acquisition and the development of programs that maximize the synergies between two credit unions. There are numerous steps to take prior to an acquisition and even more to take between the agreement of a deal and reaching operational day one.
Online registration for Convention, scheduled for Oct. 2-4 in Vancouver, Wash., is available now, with discounted registration options open until Sept. 14, 2012. Visit the Association’s dedicated Convention website for more information.
Questions? Contact Training Programs Coordinator Yuri Jung: 206.340.4817, firstname.lastname@example.org.