Due diligence in merger deals has become less thorough, so comprehensive oversight of post-merger integration is essential, a BankAmerica Corp. executive said.
Michael Scovill, a senior vice president, used to be an audit director with Barnett Bank Inc. of Jacksonville, Fla., which NationsBank bought in January. His comments, made at a risk management forum sponsored by the Bank Administration Institute, gave an inside look at the integration of two top regional banking companies.
Also, the lessons learned from that merger will be applied in the integration of BankAmerica, Mr. Scovill said. NationsBank and BankAmerica merged Oct. 1.
Merger partners need a top-notch transition team, Mr. Scovill said. "You have a very short period of time to create a framework," he warned.
A team of managers with direct lines to top executives can ease tensions between merging business units and assure that asset quality is not compromised by departing loan officers, he said.
In melding Barnett, NationsBank formed a consolidation team of executives from both companies. The team began meeting in August 1997, when the deal was first announced.
At the start employees were not very motivated, because they were worried about their jobs, Mr. Scovill said.
In any merger the new owner should strive to keep key employees happy, going out of their way to identify them and make them feel wanted, he said. Keep "people who can tolerate change ... who can rally others and add commonality," Mr. Scovill said.
Eighty percent of Barnett's small-business lending officers left after the takeover, so NationsBank learned the hard way that key officials can easily be lost.
"Your competitors will snap them up," Mr. Scovill said.
(NationsBank chairman Hugh McColl last week welcomed all the new company's employees by intra-office communique. The message went out from the new BankAmerica's Charlotte, N.C., headquarters down to Key West, Fla., where Barnett had a presence, and west to San Francisco, where the old BankAmerica was based.
(Mr. McColl stressed that "we're all part of the new BankAmerica now'" and urged his new team to "get past your differences and focus on the future,'" Mr. Scovill said.)
Customers also can get jittery, as BankAmerica found out this month when computer glitches in the integration of Barnett caused delays and long lines at branches.
NationsBank had sought to stave off problems ahead of time by polling customers about their feelings about the Barnett merger. "Customers were neutral, and that scared us," because it indicated they were taking a wait- and-see attitude, Mr. Scovill said.
To facilitate the consolidation, members of the Barnett-NationsBank transition team virtually joined the departments they were in charge of monitoring.
This gave each of them a vantage point from which to spot in-fighting among executives that could hurt the integration. It also helped in spotting which loan officers might quit, as well as those booking subpar loans to increase yearend bonuses, Mr. Scovill said.
NationsBank bought Barnett largely to keep the Florida company out of the hands of competitors like Fleet Financial Group and First Union Corp., but also to acquire some of the "superior" products that Barnett offered, Mr. Scovill said.
NationsBank wanted to complete the integration fast because it was still hungry for further expansion, he said.
But thoroughness was crucial, Mr. Scovill said. In the long run, he said, that "will save a lot more money."
All the effort is worth it, he said. "Your company's reputation and its future are at stake."
Bankers at the BAI conference said that Mr. Scovill's comments were on target.
Post-merger integration is not easy, they said. Burnout can be one problem, observed a banker whose own institution has undergone a merger.
The new BankAmericais well positioned to keep employees and customers satisfied, said David Crandall, a former Riggs National Bank official who is director of the BAI's audit and security group.
NationsBank learned how to make integration work "through the many, many mergers it's been through," Mr. Crandall said.