Bryn Mawr Bank (BMTC) executives operate under a simple M&A credo: acquisitions are all about the people, and it makes sure the people are going to stick around.
The Pennsylvania company feels so strongly about retention that it demands it early.
"It is not a negotiable. We want the key people to sign very strongly worded non-compete, non-solicit agreements, and if you don't want to do that tell us now," Chief Executive Ted Peters says. "We don't want to waste our time."
The $2 billion-asset Bryn Mawr has bought three wealth businesses and one bank since 2008, and Peters says that it entered all of those deals with that mind-set. It wants to strike a deal for another a bank or a wealth business this year, and would-be sellers are expected to share its retention philosophy.
"We've heard enough stories of registered investment companies selling, sailing for two years and then coming back and taking all the clients," Peters says.
Bryn Mawr had an agreement to buy MidCoast Community Bancorp in Wilmington, Del., but that deal was terminated in August. No official reason was given at the time. However, MidCoast's founder and former CEO, James Ladio, late in the year pleaded guilty to charges of bank fraud and money laundering.
Sweeteners are often necessary to keep key employees. For the ones who contribute significantly to the seller's revenue, Bryn Mawr is willing to offer so-called stay bonuses to remain for a designated period of time. The bonuses are for the top performers and can be between $20,000 to $40,000.
The stay bonuses, Peters says, are part of a larger push to make sure employees of acquired companies feel valued.
"You want to show people you care that is really, really important," Peters says.
It seems simple to say that people are the key to a successful acquisition, but Bryn Mawr's story is a good reminder of it. M&A was marked by distressed deals in the years following the economic meltdown of 2008, and some employees may have been devoted to the acquirer just for saving the company. However, that kind of loyalty is expected to be less common as the industry's health improves.
Also, as the value of M&A deals tick upward, retention becomes more important. An already pricey deal can appear extravagant perhaps wasteful if all the top talent bolts for a competitor.
Old National Bancorp (ONB) in Evansville, Ind., learned that lesson this year when First Financial Bancorp (FFBC) announced the hiring of a team of lenders in Fort Wayne, Ind., from Tower Financial, a company Old National is in the process of acquiring. Bob Jones, the chief executive of Old National, has described that experience as "a little kick in the butt."
"Make sure you keep these revenue drivers and you keep them happy because I don't want to have to go through this again," Jones said in a January conference call with analysts.
Susan O'Donnell, a partner at Meridian Compensation Partners, is unfamiliar with Bryn Mawr but says stay bonuses or other incentives can be a useful tools to retain top revenue producers. Still, they may be unnecessary in some cases.
"They can be a nice token that says 'welcome to the team,'" O'Donnell says. "But often times it might not be necessary to do special things like that if everyone sees this as an opportunity."
Bonuses should be based on performance, and bankers should avoid fostering a culture where special bonuses need to be paid out every couple of years to keep people, she cautions. (Bryn Mawr's Peters says he hasn't encountered that problem.)
"The best scenarios are when bankers take a long-term view and do not approach integrations from a reactive mode," O'Donnell says. Incentives are "probably a good thing, because you want [employees] to feel good and bridge the transition, but then what? The important part is how to keep them then."