2-23-15-Dinsmore.pngThe closing documents are signed, and the merger certificates have been filed. Some may think that’s when the hard work of integrating the deal really begins for a financial institution, but hopefully that is not the case. The best results happen when management envisioned this day from the beginning and began implementing a well-thought-out strategy as soon as the deal was announced. Although full integration will take two to three years to complete, here are five factors to help ease the pain of transition and integration.

Integration Team
First and foremost, the buyer must carefully select its integration team
, preferably before or early in the acquisition process. Individuals chosen should be some of the acquiring institution’s best employees in their areas of expertise, including human resources, IT, compliance, business development, marketing, training personnel, and member(s) of senior management. This team will be responsible not only for the conversion of systems, but the conversion of culture and the branding of the target. Accordingly, this front line must understand its own institution. Because the team will have access to the target between sign and close, they also will be in the best position to head off issues prior to closing, particularly with regard to employee and customer retention. The team should include employees from the target once an agreement is signed and both sides are working towards closing.

Integration Planning
As early as possible, the integration team should start meeting to detail and schedule every task necessary to integrate the institutions. By creating a plan and assigning team members to tasks, issues should be identified and rectified more quickly.  Management must stay involved to make sure no area of the planning is getting bogged down or slighted.

One element of planning that is both difficult and critical is integration into the buyer’s culture. Plans for ongoing training and management leadership efforts to bring new employees into the fold should not be overlooked as part of the overall strategy. Top management should budget time with the target employees prior to the consummation of the transaction and then be visible for a substantial period of time following closing. Open communication will help lessen target employees’ fear of the unknown and help educate them on the culture, brand and retail strategy of their new organization. Time spent planning and implementing the integration of people will be nothing but beneficial to the merged institution.

Employees of the target bank are usually very nervous about the changes and the future. It is important to the success of the transaction that the buyer identifies the employees it wants to retain. This means addressing personnel and position uncertainties early in the process and paying attention to employee emotions. The buyer wants to avoid losing the best employees, and their loyal customers, or having them poached by other institutions. Avoiding the distractions of water cooler speculation will help smooth the process. In order to try to maintain some stability at the target pending closing, stay bonuses can be a useful tool, along with severance arrangements for those who stay through closing but might not continue as employees post-closing.

Data Conversion
Another important aspect of integration planning is the scheduling of the data conversion. Upon execution of a letter of intent, the buyer should be in contact with their data processor to discuss and schedule the conversion. If there are concerns about discretion, have them sign a confidentiality agreement. Knowing the conversion date may drive numerous deal terms and set a goal for a closing date. Be aware also that many processing companies will not schedule a conversion in November or December, so you may need to factor that into the plan. Though most financial institutions hope not to run dual systems, sometimes it is unavoidable due to conversion scheduling.

The hope in any acquisition is that good customers remain with the new, combined institution, and branding the new entity is essential to that effort. Customers need to believe that the new brand is as good as or better than the previous one. In order to achieve that, a marketing and branding strategy must be prepared early in the integration process and retail employees, both old and new, should be included in the implementation. The retail front line is integral to maintaining customer loyalty. Again, robust and consistent communication is the key to success.

Keeping these considerations in mind when creating an integration plan can help address issues before they overshadow the deal and create a smooth transition to the new institution.

Susan Zaunbrecher