Ahhh… the thought of pulling off a merger or a major acquisition is the pinnacle of many a bank CEO’s career. The mere notion gets the adrenaline pumping like you just chugged a six-pack of Red Bull.
However, let’s be honest with one another. Consuming massive quantities of Red Bull and Starbucks is a very small component of pulling off the merger of a lifetime. Consequently, as is usually the case, Gonzo HQ feels it is our duty to provide a simple yet effective process to ensure your merger or acquisition is a success.
Scholars and consultants love to juxtapose merging two companies with the process many couples go through to get married. Never wanting to break away from the norm, GonzoBanker attempted to employ this widely accepted theory into our guidelines.
All mergers or acquisitions are top-secret missions. That’s the rule. (Heck, it might even be a law – we’re not sure, but we’d rather be safe than sorry.) If you’re thinking about a merger, the first step is misdirection. The minions are smart, and they can smell an impending merger from a mile away. One whiff and hell breaks loose within the organization.
Misdirection is easy to accomplish. Undoubtedly, your employees have been pushing for one big project – CRM, for example. The project has been killed four years running. Now it is time to give the go-ahead. A massive CRM project will consume just about every employee, thus providing the much-needed smokescreen to begin the merger journey.
Finding the Right Partner
The next step in the process is deciding on a partner. While there are several things to look for in a partner, the most important item to consider is the merged entity’s logo. Our research has shown that a logo is what customers really look for when deciding where to bank.
In order to find that perfect match — logo included — here’s a solid but not widely known option for narrowing the list down to just a few:
BankMatch.com, a relatively inexpensive service (only $29.95 per month), lets you create your own profile. Using a fictitious name, you describe your bank (note: embellishment is strongly encouraged) then describe in detail what you are looking for in a partner. The Web site allows potential mates to post pictures of their branches, headquarters, office views and, most important, their logos.
Upon completion, your profile is submitted to the FFIEC for approval. You will receive an immediate confirmation email followed by an email stating (hopefully) that your profile was accepted and will be posted to the Web site shortly.
Note: Do not use your company’s email address. IT is always snooping emails; therefore, make sure you use your private summer home email address.
Within minutes from your profile’s posting, start checking your email. Inevitably, someone read your profile and wants to meet you. Remember, you are anonymous at this point, so encourage your suitor to communicate via email for a while. If the suitor has not posted a logo, encourage them to do so, or simply don’t respond. Eventually, you will find what could be the “one” and agree to go on that first date.
The First Date
Because the initial date should last no longer than 1.5 hours, we strongly recommend either of two places for that first encounter:
Not revealing too much on the first date is critical. The purpose of the date is to see if your match offers to pay the check. If they do, keep them on the list; if not, let them know as you walk to your cars that the chemistry is just not there.
You will probably go on many first dates; however, do not lose faith, because eventually you will meet your match.
Once you have found your match, the courtship phase begins. You play many rounds of golf, drink martinis and play poker at your match’s Country Club. Discussion involves what each of you wants from the potential relationship or what your future desires are. More than likely you will be invited to your match’s office, and in return, you will extend an invite to yours. (This is the time to pay close attention to office size, window views and parking spaces.)
The length of the courtship varies, so to put a timeframe on this phase of the process would be inappropriate. Nevertheless, if the courtship goes smoothly for two months, it’s time to get intimate.
The intimacy phase is where the real work begins. The parallels between mergers and marriages are okay, but only up to a point. Unlike when two divorcees get married and each had several children during the first marriage that don’t go away, a merger is business and not everyone gets to stay. Deciding who will stay and who will go is the toughest part, so to take some pressure off these difficult decisions, Gonzo has developed what we call the Game Theory. We tested the following games on specific lines of business, but feel free to substitute your own game if you feel another will work better within your culture.
Line of Business
The wedding day is fast approaching. The members of each family that get to stay have been determined. Now the tough negotiations begin. Titles and, of course, the logo must be decided at this point. Golden parachute agreements are also something to consider. If a corporate jet is involved, the time-sharing of said entity must be decided. Country club memberships, parking spaces and office sizes must be determined. Naturally, there will be some give and take, but do not give in too much. If an agreement cannot be reached, this is the time to walk away, redo your profile on BankMatch.com, and start over.
If you have followed the Gonzo process, reaching an agreement should not be a problem, and wedding bells will soon be heard.
The final step, of course, is the wedding. At last, it is no longer necessary to keep the match a secret.
Nonetheless, we have found the best way to inform employees and prevent a mass uprising and/or a customer revolt is to change signage before the nuptials are announced. Why?
THE NEW LOGO!
Remember, the primary reason you embarked on this journey through matchmaking hell is the logo. The new logo has so much power that employees will not even see the layoff notices on their desks; customers will not recognize the poor customer service; and many analysts will completely overlook the fact that, financially, the match makes absolutely no sense.
The logo will be revered. That is what you will be able to claim as your legacy.
Time for me to pull that golden parachute, GonzoBankers. Till next time,
Cornerstone Advisors brings a unique set of skills and processes to help financial institutions implement an “integration mindset” in preparation for the complexity of a merger. Our experience enables us to apply key components to your institution’s goal of a stronger franchise:
With our M&A Integration Services, Cornerstone has helped institutions:
If a merger or acquisition is in your institution’s future, contact Cornerstone to learn how we can help you make it the smoothest possible process.