I have had the privilege to be part of a merger process from different vantage points: on the sell side, as legal adviser, and then as community bank chairman and CEO. I can safely say that a merger process is anything but linear. You can expect each stage—pre-discussions, negotiations, post-signing and pre-closing—to be accompanied by myriad issues and shifting emotions. What follows are a few insights into how to “own” your process by anticipating issues and emotions. Said simply, a successful transaction requires comprehension, coordination and communication at each stage.
Comprehension refers to knowledge about what happens when the board contemplates, decides to explore and votes to embark on partnering with another financial institution. To gain that knowledge, ask yourselves what a successful transaction would look like and identify issues of importance. Learn about what type of partner a potential institution likely will be at each stage. What points are likely to be critical to the other side? Transactions involve give and take, and lines in the sand cannot be drawn at every turn.
Practically speaking, the process can reach a point of no return, emotionally, operationally and legally. Comprehend the unvarnished realities associated with each stage of the process and the impact that a transaction, beginning with the announcement, will have on your board, employees and communities.
Coordination means ensuring that every party to the process is doing what they are supposed to be doing. Own your process by knowing what role each key adviser will, or will not, play along the way. Manage the expectations of your board, and understand that certain crunch times will tax your internal resources. As an old-school guy, I made a lot of lists (on paper) of things on my mind and on the minds of others within the organization.
Communication is essential, yet breakdowns are common and can lead to frustration, infighting, bitterness and an erosion of the critical trust that must exist between all parties. Communicate with advisers, directors and key executives—in real time—about how the issues you initially identified as critical, or uncovered in due diligence, are being addressed. Anticipate employees’ questions and prepare your responses. Have regularly scheduled meetings. Trust me: A lot will be brewing inside your bank.
The merger process can be daunting, especially for leadership that has not experienced the weighty, often nuanced issues that arise at each stage. Your legal and investment banking professionals will help check many boxes with their wisdom and experience. But again, the process is yours to own. It is business, of course, but for the CEO, board and employees of a community bank, it is also very personal.