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Should your credit union have a merger playbook?

Jan 23, 2024

As financial institutions continue to consolidate, credit unions need to have a well-thought-out strategy for potential merger activities. One crucial tool that can help credit unions navigate the complexities of mergers is a merger playbook.

A merger playbook is a comprehensive guide that outlines the steps and best practices for a successful merger. It serves as a road map for the merger process and ensures that all stakeholders are aligned and working toward the same goals. Having a well-developed playbook can help ensure a smooth and successful merger by providing step-by-step guidance for cultural and tactical implementation.

Understand the need

Before diving into the details of a merger playbook, it’s important to understand why credit unions should consider developing one. A merger playbook provides several benefits:

1. Alignment of stakeholders: A merger Playbook helps align the board of directors and leadership team’s opinions and appetite for a merger. It clearly outlines the considerations for the credit union to remain independent or seek a merger and identifies the group, legacy and personal reasons stakeholders prefer a particular strategy over others.

2. Strategic decision-making: By conducting a peer analysis and understanding the credit union's distinctive strengths, weaknesses and other factors, a merger playbook facilitates informed decision-making. It helps credit unions determine the ideal size and financial structure of potential merger partners and evaluate the alignment of the credit union’s vision and mission with a potential merger.

3. Talent management and cultural integration: A merger playbook evaluates talent management and also guides credit unions in identifying common systems, vendors and contract expirations for functional integration.

4. Compliance and risk management: A well-developed merger playbook includes resources to assist with legal requirements and financial items, such as due diligence and valuations. The playbook also outlines the merger accounting process and helps credit unions navigate compliance and risk management challenges during the merger process.

Consideration of key elements

Creating a merger playbook starts with understanding the board of directors’ and leadership’s opinions and appetite for a merger by clearly outlining the following:

  • Consideration for the credit union to remain independent and continue to focus on organic growth or seek a merger to grow through combining with another credit union.
  • Determine a timeframe for when a merger would be considered.
  • Identify the group, legacy and personal reasons stakeholders prefer a particular strategy over others available.
  • Understand the credit union’s unique strengths, weaknesses and other factors against similar institutions using peer analysis data.
  • Understand the credit union’s written enterprise risk management assessment.

Prepare a written document

Here are important points to include in the merger playbook:

  • Financial modeling to determine the ideal size and financial structure of the ideal merger partners and the impact on the credit union. This analysis could include mergers with both credit unions and banks.
  • Evaluation of the readiness and capability development opportunities of leadership.
  • Determining the alignment of the credit union’s vision and mission with a potential merger by using strategy and culture checklists.
  • Evaluation of talent management, including the employee handbook, succession plan, organizational structure, employee engagement, benefits, turnover and communication plan.
  • Resources to assist with legal requirements and financial items, such as due diligence and valuations NCUA, state and other regulatory entities should be considered based on the merger partners.
  • A “best fit” checklist to evaluate alignment based on critical areas identified by the credit union.
  • A process and functional integration matrix to identify common systems, vendors and contract expirations.
  • A checklist of potential considerations that could impact members, such as share account and loan options.
  • Outline of the merger accounting process.

How Wipfli can help

By following the key elements outlined in this article, credit unions can develop their own merger playbook and be better prepared for a successful merger. Wipfli’s specialists are here to support your credit union in developing market strategies and effectively maintaining compliance throughout your operations. We can assist you in reviewing your programs, implementing solutions and staying current with regulations. Contact us to learn more about how we can help you protect consumers and your institution.

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Author(s)

Danielle M. Damon, CIA
Manager
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