Executive Summary
Credit union mergers occur at the rate of approximately one per day in the United States. Given the current and future regulatory/competitive environment, it is safe to say that credit union mergers will continue to occur at the same pace or at an even more rapid pace. Most readers of this study will likely be involved in a merger with another credit union in the very near future, if they haven’t been already.
What is the research about?
Since credit union mergers are a relatively common occurrence, the Filene Research Institute felt it necessary to study the topic in greater detail. In 2006, we sent William Brown, an associate professor at Texas A&M University, and a group of his graduate students on a quest to discover critical issues in the merger process, with a special emphasis on the role of the board of directors. It is important to study the board’s role in mergers because:
- Merging is a high- stakes decision.
- Relatively little is known about the topic.
- The answers we seek may help inform credit unions about pitfalls in the merger process.
What are the credit union implications?
As stated at the beginning of this summary, the odds that your credit union will be involved in a merger, as either the acquiring or the merged institution, are quite high. There are relatively few sure bets in the world of consumer finance, so this high-probability event presents a clear opportunity for you and your senior team to plan proactively.
The first and most practical thing you can do once you finish reading this study is to incorporate merger and acquisition scenarios into your strategic plan. In this plan it may make a great deal of sense to objectively define the elements you deem essential to move forward as either an acquiring or a merged institution. In this study, Brown reports that two-thirds of those interviewed failed to take this proactive planning approach. In the words of Louis Pasteur, the famous scientist, “Chance favors the prepared mind.”
Second, if you have not already done so, develop a succession plan for your chief executive. Smaller credit unions cite the retirement or resignation of their CEO as one of the main reasons for a merger. Proactive succession planning can ameliorate surprises for the board, staff, and members and create a culture of organizational continuity in planned and unplanned leadership changes.
Finally, board members are encouraged to think critically about their role in the merger process. This study reports on a variety of effective and not so effective board practices in play during the merger process. Make it a point to self-evaluate your board against the findings of Brown and his research team.