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Manpower (DMark Group, Inc.)


Financial institution mergers and acquisitions: 5 steps to success

Oct 13, 2020

For financial institutions seeking to grow and transform, mergers and acquisitions offer a distinct opportunity. To be effective, banks and financial institutions should invest time and resources into upfront planning, including solid analysis of how M&A plays into their long-range strategy.

Based on our own experience helping guide financial institution clients through the process, we’ve seen that the most successful mergers resulted from a combination of diligent preplanning, thoughtful identification and solid execution.

Step 1: Plan, plan, plan

Buy-in is important at the earliest stage of the process. Build internal consensus around M&A strategy and value before beginning your search.

Prepare for the work ahead by making sure your own processes and systems are in good order. Determine whether your team has the capacity to take on the additional responsibilities of combining two organizations. These demands could be anything from handling the volume of additional transactions to the ability to rationally determine what processes or systems should remain and which ones should be changed.

In planning, ensure agreement among the management team as well as the board, family or whatever governance structure your organization has in place. This support and buy-in will ultimately pay dividends as you work through an integration.

Step 2: Know your M&A blueprint

Have a good understanding of what you are looking for (as well as what you aren’t). Be strategic and focused in your initial searches and discussions, and avoid the temptation to respond to any available deal flow — jumping at opportunities without a clear understanding of how such a merger would create value. 

Beyond lines of business, geography, financial compatibility, workforce skills and customer expectations, plan a comprehensive assessment of cultural alignment. Embarking on the process with the false notion that you can make two mismatched cultures dovetail with one another can be a challenge too steep to overcome.

The wrong cultural fit — such as stark differences in governance processes, compensation expectations, customer service philosophies, work arrangements and feedback — can kill more deals than any other factor, as it rightfully should.

Step 3: Manage M&A communication for trust

Prioritize solid, open lines of communication between both parties. No different than in any other relationship, communication is the foundation for the ongoing process of developing connection and rapport — critical elements to building trust. A core sense of trust will be vital throughout the process, as bumps and hurdles naturally occur along the way.

Be candid and honest throughout the process, keeping in mind that this will be a stressful time for both parties. Emotions are inevitably high during a transaction, as your team works to reconcile the risks inherent in combining different cultures, leadership styles and operational practices

Tactically, communication will be essential to keep the deal moving forward, keeping all parties on schedule and on the same page as details are agreed upon and documented.

Step 4: Be bold

Solid execution starts with having the courage to make the tough decisions that are needed, coupled with the right amount of patience and empathy.

Establish appropriate expectations and consistency in follow through to move the merger to completion. A high level of execution also creates a standard for how business will be done in the combined organization.

Step 5: Have a sounding board for M&A success

Through it all, look to leverage any relationships you might have from peers and financial institution M&A advisors like Wipfli who have been through the process before. The right partner can help you avoid the most common pitfalls that arise and help you navigate complex corporate, regulatory and fiduciary issues involved in bank mergers and financial institution M&A.

Contact Wipfli for guidance on your organization’s merger or acquisition, and visit the resources below for more insight:


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Wipfli Editorial Team