BARCELONA, Spain — A credit union that has a goal of controlling 25% of the CU assets in its country has some advice on making mergers work.
Among the keys: make sure the board and CEO are aligned on the need to merge and the merger partner; act in the best interests of the member; broaden the range of products, service and access, and reduce risk exposures.
But as Bob Powell, chairman of Credit Union Australia, Sydney, made clear to the World Council of CUs' World CU Conference, those simple keys aren't so simple, and require confronting difficult, often personal issues.
Powell, a 33-year veteran as a board member, has overseen numerous mergers since a then (A)$50 million St. Anne Credit Union, which began growing via mergers in 1995, including several "rescue mergers." Today, it has grown into a (A) $7.6-billion Credit Union Australia (about US$6.1 billion), serving 400,000 members with 76 branches.
120 CUs Wrapped Up in One
In all, said Powell, Credit Union Australia's family tree represents some 120 former credit unions. Powell said the reason it's CUA that's still standing after all those other nameplates were taken down, is because it has merged from a position of strength, and it has a strategy for mergers in place.
"We want to have two more significant mergers and we'd like to be significantly larger," said Powell. "We would like to represent 25% of the assets of the (Australian) movement. We will look for cultures that align with ours, and feel we can truly be a national organization. You must be able to protect your brand, and you should consider your long-term business strategy. You must examine your future value proposition if you merge, or if you choose not to merge."
But be prepared, cautioned Powell, to recognize that half of the combined management team and boards are likely to be redundant, and will need to be reduced-a task made easier by Credit Union Australia by providing attractive severance packages, including for directors.
"Board representation is tricky and it's where the chairman's role is vital," said Powell, acknowledging being chairman has helped him survive through all the mergers. "You can only hope that some of the board members are considering retirement, and you can encourage them to see the value of spending more time with their wife and children. There are going to be some casualties. You can start off with a larger, merged board. In one case we started off with 12, but decided that for the next three years there would be three board members standing for two positions until we got to our desired board size."
Eight More Pieces of Advice
Other merger advice from Powell:
- Start discussions early on the new name, as there will be an emotional attachment to whichever name is headed for "oblivion."
- Be prepared that as the CU grows, especially over larger geographic areas, for employees who want to transfer to other locations.
- The chairmen and CEOs must lead the process. "It's our opinion that an independent consultant can't really achieve the desired result. But we did use a consultant in deciding the values of systems and branches to help make decisions."
- "Communications are critical to both staff and members. Benefits must be made clear. If you can't articulate the benefits, you may be better off staying as you are." Powell said to be prepared for many, many issues that may seem small to the CU, but large to the individual member. For instance, he said he was contacted by one member who complained, "I was member 53 and now I'm member 50,340."
- After products, services have been "harmonized," it's important to measure whether cost savings are really being delivered.
- Form a committee to examine cultural differences. "We have had a couple of instances where we thought we were very similar, but then came to see this was not the case."
- Don't expect immediate financial success; benefits may take up to two years to be realized.
- "Self interest can be a deal-breaker. Directors and management need to understand they may not have a place after the merger."
