The 3rd Best Day of My Life

We lifted our glasses of champagne in celebration; After months of evaluating merger proposals from several credit unions, selecting a finalist, and completing the final negotiations my client could finally breathe a sigh of relief.  Leaning back in his chair in the lounge, he reflected on what had just transpired.  With a smile he states, “This was the 3^rd best day of my life, next to my marriage and birth of our child.”

Having spent a lifetime dedicating himself to the credit union movement, this CEO had grown his credit union profitably through the ups and downs of the economy.  He’d navigated the contraction of his sponsors’ workforce.  With this board and staff, he had built a strong well capitalized credit union.  Yet he was surrounded by formidable competitors and a changing consumer expectations.  In evaluating their strategic options, the leadership concluded their best strategy would be to partner with another credit union through merger.

The CEO was elated by the great benefits the merger would bring to the members.  He was proud of the large raises the staff would receive after years of salary freezes.  Finally, he would have the resources to be a more essential contributor to the community.  The board was also comforted in knowing had partnered with a credit union known for operational excellence, financial soundness, and economies of scale so essential to competitiveness in this new financial world.

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The story of this CEO is similar to the experiences of many credit union leaders I have had the honor of leading through the merger process.

Many such leaders are not merging because their credit unions are in dire straits.  Most often their credit unions can continue to survive for years.  Yet, their ambitions are greater than survival - They have a desire to significantly alter the competitive balance in the markets they compete.  Partnering with a credit union that offers new value proposition and scale that benefits the members, employees, and the community.

Through my many years of facilitating credit union planning sessions and advising on mergers, the constant has been directors’ desire to do great things for their members.  They feel wonderful when more people know about and take advantage of the great things the credit union can offer members.  The boards envision a future of more branches, better technology, more personalized service, and better rates.  Yet, the realities of investing in growth initiatives is limited by earnings and desire to retain adequate capital ratios.  With limited resources, the ability to address these issues and service members as they envision gets delayed.

A merger provides the credit union leadership the opportunity to achieve many otherwise unattainable goals.  Following are three areas where credit unions can benefit:

• Branches: The merging credit union’s members often benefit from the larger branch network of the continuing credit union.  Occasionally, a new branch or branches are built as a result of the deal, enabling the merging credit union to realize long term goals for its membership.  Acquired branches are usually updated and rebranded to offer a consistent member experience across all branches.
• Products: Many times when a merger has been announced there is excitement among staff about the new products and services they will be able to offer. Mortgages and small business lending are two areas that often difficult for smaller credit unions to develop the deep expertise and scale necessary to offer a competitive product lineup. Additionally, due to cost constraints, smaller credit unions are often restricted in their ability to offer multiple credit cards to satisfy different market segments. Partnering with a larger credit union has provided many credit unions the scale to offer a broad portfolio of products at more competitive pricing.
• Employees: Training and career development opportunities are one of the areas many employees cherish as a benefit of a merger.  Often, there are limited training opportunities within smaller credit unions.  Also with stagnant employee growth there are limited employees to advance in their careers.  Larger credit unions offer new career paths and opportunities for employees to specialize.  In many mergers, we have seen member services staff from smaller credit unions promoted to branch manager positions, an option that would not have otherwise been available to them.  The negotiating power of larger credit unions also enables the merging credit unions to offer their staff better salaries and benefits.

Now, months after the celebrating the merger, the CEO continues to speak highly of how fortunate they were to find such a great partner.  Employees have been added to expand the services and outreach into the community.  For this credit union the merger was a Big Win.

This article was originally published by Glenn Christensen on CUInsight.com.