CHARLOTTE - Wachovia Corp., energized by its integration with First Union Corp., is now plunging into a similar project for the brokerage joint venture it created July 1 with Prudential Securities.
Executives at the $364 billion-asset Wachovia say they have accelerated at least one key aspect of that task. They plan to rebrand venture as Wachovia Securities in September - one year ahead of schedule - partly at the behest of Prudential's brokers, whom Wachovia says are eager for the change.
In most other respects, Wachovia officials are taking the same meticulous approach to the brokerage project that they used in the $14 billion Wachovia-First Union deal, said David Carroll, Wachovia's co-head of merger integration, in an interview Friday.
Though Wachovia still has two large bank data centers to consolidate this year, about 100 of its executives and employees who worked on the integration team paused last Tuesday to celebrate at a dinner at the Charlotte headquarters. Chairman and chief executive G. Kennedy Thompson toasted the audience, calling their work the "best-executed merger integration in our industry."
Mr. Carroll said pacing helped. First Union, the buyer, took on its rival's name and gave itself three years to complete the unification - far more time than in any of its previous deals. By most accounts the Wachovia integration went smoothly, especially compared with First Union's ill-fated 1998 deal for CoreStates Financial Corp. That gained notoriety after service glitches sent customers fleeing.
"We had a different approach this time," Mr. Carroll said. "We took a longer period of time to do it, and we had much more rigorous and detailed formal planning before any action was taken."
It was the CoreStates debacle that many Wachovia investors and analysts cited as worrisome when their bank announced its plan to merge with First Union. SunTrust Banks Inc. tried to leverage that concern by making a counterbid. In a summer-long proxy campaign in 2001, the Atlanta competitor frequently cited First Union's post-CoreStates woes in urging Wachovia shareholders to reject the offer.
But First Union prevailed, closing the deal with Wachovia in September 2001 and taking its name. Since then Wachovia has delivered more than 100 million messages about the merger to its nine million customer households.
It quickly gave free access to its combined 4,500 ATMs and engineered new systems so that only a handful of customers were forced to change account numbers.
Executives also sold the deal to investors by using conservative financial assumptions. Wachovia is set to meet a goal of $890 million in annual cost savings, and it now looks for total merger charges to be $110 million to $130 million lower than originally expected.
"We had a goal of underpromising and overdelivering," Mr. Carroll said. "Frankly, we've been paranoid about every aspect of this integration."
Observers say the bank succeeded in preventing the types of problems that can drive away customers.
"If anything, they've done much better than expectations were at the beginning," said D. Anthony Plath, a banking expert and a finance professor at the University of North Carolina in Charlotte. Some merger specialists advocate quick integrations, he said, but "I think Wachovia sort of broke the mold" by taking its time on the merger.
When Wachovia converted its Middle Atlantic region in July - including the area around CoreStates' former Philadelphia headquarters - Mr. Carroll said it logged only 83 "incidents" and resolved them in an average of 69 minutes. By comparison, it logged "a couple of thousand" in the CoreStates deal and took as long as two months to correct them.
Wachovia has taken what it learned and applied it to the Prudential transaction, which Mr. Carroll began working on in January. Systems and back-office operations are to be combined by September 2004.
The rebranding schedule has been moved up, however. Wachovia, which owns 62% of the venture to Prudential's 38%, originally said it would wait until next September to eliminate its partner's name. It will start hanging the Wachovia Securities shingle on Prudential's offices and other operations this September and plans to be finished by yearend.
Still to come are converting large computer systems and consolidating Prudential's back-office operations into Wachovia Securities' center in Richmond, Va., next September. That consolidation will cut about 2,100 Prudential jobs in Manhattan - part of the venture's plan for annual cost savings of $200 million. Mr. Carroll said Wachovia hopes to persuade at least some of those employees to move to Richmond and other operations centers in Charlotte and Winston-Salem, N.C.
At last Tuesday's dinner the merger team presented Mr. Thompson with a 1,000-page bound volume outlining 18 key merger-integration processes as well as "do's and don'ts" and "everything we learned" from Wachovia.
"The [Space] Shuttle launches with less planning than this," Mr. Carroll joked.
