After-the-merger streamlining can be welcome event for all.

To the list of well-known but doubtful assertions, we can now add one more: "Everything will be the same after the merger."

Anyone who has worked for an institution that has been involved in a merger or consolidation knows that this is just not the case.

To the employees of an acquired bank, of course, the most important question is "will I have a job tomorrow?"

To Fire or Not to Fire?

The top officers of acquiring banks, in a bid to keep up morale, frequently announce in advance that no one will be fired.

This, naturally, is a drastic decision, and the acquirers must be certain that the culture of the purchased bank is solid enough to support such a move.

In some cases, buyers come into sutuations where the work ethic is so bad or the bank so overstaffed that heavy cuts have to be made.

If the pruning job is done right, the remaining people gain a boost in morale rather than a slump: They have made the cut, indicating that their work has been appreciated.

Sometimes little things can win a staff over to the new management overnight.

For example Gerry Lipkin, chairman and CEO of Valley National Bancorp, of Clifton, N.J. tells that after taking over several banks from the Resolution Trust Corp., he wondered how he could meld their people into his own organization, which has a strong reputation as a "happy shop."

"In one case it was a snap," Gerry reported. "I walked into a branch of one bank we acquired and immediately saw that the tellers had no stools.

"Where are your stools?" I asked one lady.

"Oh, our previous president didn't like tellers to sit down," she replied.

So he said to that teller "Mr. X, the president, sits at his deck. He doesn't stand all day." The CEO called the purchasing people right there and ordered stools for all the bank's tellers.

Branded as the |Enemy'

Think of all the banks that have been acquired only to have the staff immediately feel that the acquirer is the "enemy."

I remember the head of one midwestern bank holding company telling me about an acquisition.

"We sat down and negotiated a fair price for the bank and paid them with our stock. But then, instead of feeling that they had joined our team and had the goal of helping all of us prosper, its officers and staff looked upon us as the enemy.

"They tried to do as little as possible, to milk us for us much as they could, and generally operated as if no agreement had ever been reached. Naturally, we had to change the top management and prune throughout the organization."

How you handle the staff of an acquired bank has implications that run deeper than whether the bank will be a star performer for you. Potential acquisition targets look at how a bank in acquisition mode handles the staff and officers of each acquisition. These independent bankers figure that in the event their banks were to be acquired by this institution, they could expect similar treatment.

Some bankers admit to the following strategy: "I use kid gloves until I get all the banks I want, then I prune when I have to." But other have the attitude that they mean it when they say, "Everything will be the same after the merger."

But if you do sell, which approach do you want? Do you want to sell your bank to an organization that leaves everything intact? Or do you want to join one that is going to rationalize the organization and make it more efficient and profitable?

Going for Shareholder Value

What the management of the bank looking to be acquired in a stock deal is thus wondering is: "Should we consider the best interest of our shareholders or should we keep things stable for our employees?"

This is not an easy question. Quite often we have seen the board finally throw out a CEO who just was not tough enough to rationalize the bank, after which the new management made changes that helped profitability and performance soar.

The former CEO experiences mixed emotions. He feels terrible at losing his job, but he's very happy to see his stock in the bank go up.

Gerry Lipkin of Valley National has an answer to this dilemma: Every employee who has been with Valley for a year or more becomes a shareholder, even if the bank has to lend that employee the money to purchase the stock.

To conclude, no one believes that "everything will be the same after the merger." But what a good management team can do is to get the staff, the officers, the stockholders, and the community to feel that "we don't want things to be the same as they used to be anyway."

Mr. Nadler is a contributing editor of American Banker and professor of finance at the Rutgers University Graduate School of Management.

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