Ways to Ensure the Success of Merger

Five Ingredients for Executing a Merger

1. A compelling value proposition

Every merger discussion must begin with a well-articulated value proposition. Both credit union boards and management teams must understand the rationale for the merger and appreciate the tangible benefits—in terms of products, services, rates—that the merger will bring to the members.

2. Open-minded stakeholders

In any merger negotiation, there are multiple stakeholder interests that must be addressed. While what is in the best interests of the members should be the ultimate factor in deciding whether or not to merge, it is often the particular interests of the board and management team that determine the issue.

According to one CEO, it is important to perform a stakeholder analysis to determine who will honestly entertain the idea of a merger and who may oppose the concept. A long-tenured board member, for example, may be more emotionally attached to the concept of credit union continuity despite evidence that a merger would benefit the members. However, sometimes even a long-tenured board member will surprise you and act “as a true steward” in the best interests of the members.

The key to a successful merger negotiation process, says one CEO, is to identify the influential stakeholders on the other side of the table and address their concerns. Once their issues are addressed, they may be able to influence others.

3. Good timing

Timing can be the difference between a successful merger negotiation and a failed attempt. Says the CEO of a small credit union who merged with a larger credit union, “our merger discussions moved quickly because we had been speaking with several other credit unions about a merger. Through the process we had learned a lot about ourselves and knew what was important to us.” By the time the eventual merger party approached the credit union, “our board was receptive to the idea.”

Persistence is one way to ensure that one’s overtures have a better chance of succeeding. According to several CEOs we spoke with, it takes “a lot of leg work” to arrive at the stage where a merger is a realistic possibility. One large credit union stated that it took nearly five years to convince a smaller credit union that a merger was in its best interests.

4. Fair treatment of people

To accomplish a merger, both parties in the negotiation process must come away feeling that a fair outcome was achieved. The concept of “fairness” will vary with each situation. In general, however, the terms of any deal must address the specific interests of the board, provide appropriate remuneration to management, and ensure staff positions will not be eliminated..

With respect to management, most of the credit unions we spoke with developed compensation plans based on the specific situation and skills of each manager. Executives and managers who were approaching retirement or whose service was no longer needed were offered generous retirement packages. Retention bonus packages are often offered to those managers one wishes to retain.

5. Trust & Respect

No merger discussion will succeed without trust and respect. Each party must feel comfortable with the other as a partner and believe that the negotiated terms are made in good faith.

Merger discussions can be complicated affairs and no two negotiations are alike. However, if one can deliver the right message to the right people at the right time and back it up with a fair, believable offer, chances are the merger may succeed.

Other policies to follow for successful merger

Followings are some of the policies that the management of merger companies follow:

  • Retain all employees one year
  • Employees keep salary but may be reassigned duties
  • Employees keep seniority (except in pension) (this will keep long-term employees happy)
  • Keep existing facilities open as long as members support them

Also for bridging the cultural divide between organisations, these people management policies are critical:

  • Pay and benefits
  • Management selection and development
  • Harmonisation and integration of HR practices
  • Employee communication
  • The pace of change

Successful mergers are led by CEOs who share their vision of the new organization and put their personal imprint on people management (Marks and Mirvis, 1997). Based on the literature, the CEO's winning formula is as follows:

  • dedicating executive time and focus
  • putting together a leadership team;
  • focusing management attention on success factors
  • creating a sense of human purpose and direction
  • modeling desired behavior and rules of the road.


1. http://www.creditunions.com/home/articles/template.asp?article_id=1927

2. http://www.creditunions.com/home/articles/template.asp?article_id=1152

3. http://www.onrec.com/content2/news.asp?ID=3240

4. Anatomy of a merger: behavior of organizational factors and processes throughout the pre- during- post- stages (part 2);
Steven H. Appelbaum, Joy Gandell, Barbara T. Shapiro, Pierre Belisle, Eugene Hoeven; Management Decision; ISSN: 0025-1747
Year: 2000 Volume: 38 Issue: 10 Page: 674 - 684

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