Super Community Banking: How Super Community Strategy Avoids

We are witnessing an unprecedented wave of consolidation. The magnitude of the consolidated entities is record breaking, as are the prices and the cost savings associated with those transactions.

But there is a dark side for big out-of-state acquirers. These deals tend to leave employees and customers unhappy with the new arrangements.

In almost every community, customer exodus follows acquisitions by large out-of-state banks. That erodes the value of the acquired bank and provides opportunities for competitors.

Here are some acquisition pitfalls - and how super community get around them:

Failure to recognize the complexity of the transaction. Super community banks have learned not to underestimate the difficulty of change and integration - regardless of how small the bank or holding company being acquired.

Conflicts and hidden agendas. Even when both parties push for the same decision, their motives and agendas may vary widely. But in super community banking there is acceptance of the different agendas and willingness to accommodate both, as long as the result is consistent with shareholder value.

Underestimating the impact on customers. The decision-making process reduces customers to abstract numbers, which often are not realistic or meaningful. Super community banks want to make only minimal change at all points of customer contact; they try to cut costs by consolidating back- office operations, thereby preventing major disruption to customers.

In short, acquirers tend to underestimate the disruption a deal will cause and overestimate the potential savings. The super community strategy, on the other hand, keeps potential negatives in check and leaves super community banks well-positioned to capitalize upon the dysfunctional transactions of others.

I often hear that the best source of new business is an acquisition of a competitor by an out-of-state player that isn't a super community bank. As you observe such acquisitions in your own market, learn something from them. Remember what went wrong, and avoid it when you make your next acquisition.

Otherwise, the vicious circle of customer loss that leads to more customer loss and then to employee loss will catch you too the next time you make major changes.

Ms. Bird is senior vice president of strategic initiatives at Norwest Corp., Minneapolis.

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