Merging two credit unions with reputations intact

In the wake of the pandemic and the challenges that surfaced as a result, 2021 appears to be another year that credit unions consider merging with another financial institution. When two credit unions look to combine forces through a merger or acquisition, the pace of negotiations means their reputations and a well thought out communications strategy often gets overlooked. 

Although M&A deals can be challenging to navigate, the common goal between parties is often simply to accelerate value capture through growth and improved performance. However, a significant portion of a deal’s value for the acquiring credit union is often eroded by member attrition due to poor post-merger communication with acquired members.

In the banking world, the Deloitte Center for Banking Solutions surveyed banks who recently went through an M&A transition to gather insight into what drives a customer to stay or to defect post-acquisition. Of the acquired clients surveyed, 48% had either already switched financial institutions or reported a switch was likely. Almost two-thirds of respondents who switched to another financial institution did so within the first month. 

M&A: Loss of Reputation, Trust and Members

According to the study, thirty-six percent of the financial institutions’ customers who switched after an acquisition did so for emotional reasons. Fear of the unknown and resistance to change stoke the flames of member discontent. Changes to service, people and product offerings are unpopular and generate feelings that the new financial institution does not have the members’ best interests at heart. Feeling undervalued is a key emotional reason that members leave. This feeling of neglect ultimately damages reputation.

Gallup Consulting confirms customer behavior is determined by emotions more than anything else, based on 30 years of behavioral economic research. To that end, any communication that works to build emotional satisfaction will address trust issues and reduce attrition.

Steps to Take to Strengthen Reputation During and After a Merger

A credit union’s early communications to members regarding the merger are of the utmost importance. The first step is a personalized note from the CEO that welcomes and reassures acquired members, placing emphasis on their value as members. A heartfelt video message from the CEO is also a nice touch. However, face-to-face direct interactions that occur in the branches have even more impact on member attrition.

Employees are, in essence, the face of the credit union and are, therefore, extremely essential to member retention. As such, the benefits of the merger should be thoughtfully and clearly communicated to staff. Failure to clearly communicate the details of the merger early with employees translates into confusion and later, poor member understanding.

Staff meetings should be held immediately to bring the core benefits of the merger or acquisition to light. It’s also very important that executive leadership present messaging to staff in a clear, unified voice. Training and practicing the talking points will keep the desired message consistent. Staff should be instructed to relay these key messages to members.

Following initial staff meetings and the delivery of talking points, ongoing communication across multiple platforms (e.g., mobile, website, in-branch, written marketing materials, video) will welcome questions, build excitement and, above all, express to members that they are valued.

The value of genuine communications to strengthen member retention through the post-acquisition integration process is quite clear. Lost members must inevitably be replaced by new ones. Focusing on rebuilding new membership can cause existing members to feel neglected and switch credit unions. Even a small improvement in member retention can make a big difference to deposit balances, fee streams, loan portfolios and, ultimately, satisfied members.

Many acquisitions fall short of expectations because of a failure to understand the importance of communicating. Even though the acquisition may look great on paper, it’s important to pay attention to the reputation ramifications, as well as the communication needs of the post-acquisition integration process. This is the secret to making a credit union M&A deal truly successful.

Harmonizing two credit union cultures takes time. Communicating to deepen new member relationships, build brand loyalty and advancing a credit union’s reputation takes ongoing efforts over an extended period of time.

From our reputation management firm’s experience supporting merging credit unions, the overarching theme we have encountered is that clear, concise and consistent communications are at the epicenter of a successful merger. Moreover, the cohesiveness of a strategic plan – and its actualization – must include safeguarding the credit union’s reputation as a paramount consideration.

Merging for More Than Balance Sheets

When analyzing and auditing a respective credit union to determine if proceeding with a merger makes sense, considerations also include the strength of both credit unions’ balance sheets, cultural similarities, and compatible technology and communication channels (e.g., having the same core provider).

If financial institutions decide to come together, communication must be considered in the context of logistics and cultural sensitivities, member nuances and understandings. Then the importance of timing and channels of communication can make all the difference in keeping institutional reputations intact.

Timing Is Everything

Communication is important before, during and after a merger. As communication and reputation management professionals, we are often brought into the realm late. We should be brought in early, however, to help maximize opportunity and mitigate risk.

To ensure a potential merger happens seamlessly, multiple departments should be involved beforehand – not only the top-level executives. Be sure to include members of your operations, IT, communication, marketing, HR and even legal teams. It is also important to ensure that the board, executives, branch managers, member-facing staff and spokespeople are unified in their communications. This can be accomplished with training.

During a merger, a multi-prong approach should be taken for communication in the following sequence:

• Internally to the acquiring credit union: The board, executives, branch managers and staff.
• Internally to the credit union being acquired: The board, executives, branch managers and staff.
• Externally to existing members.
• Externally to the credit union industry, communities being served, vendors, media and social media outlets. 

Assuming the reason for merging is to bind together, prosper and grow, the six months after a merger should be considered a working juncture of continued proactive communications and reputation enhancement. A credit union should use this opportunity to retain staff and members, as well as to attract new staff and members. Direct communications can also help strengthen the bond with the communities that the combined credit union serves, through staff volunteer time, addressing important issues and being stewards of the merger process.

One For All

To grow and prosper while expanding services for members, credit unions can market themselves – an expensive undertaking – or they can acquire or be acquired. Historically, credit unions expand their field of membership through a merger because it is a cost-effective way to increase market penetration within the existing market, acquire new branch locations and add vital fields of membership.

Although M&A deals can be challenging to navigate, the common goal between parties is often growth, member retention and improved performance. Keep in mind, however, that mergers and acquisitions are rarely a partnership of equals. One credit union is typically acquiring another, not necessarily blending, which means one name and culture generally rises to the top. Still, a merger should still be mutually beneficial.

Continuous listening as an active part of your reputation management plan – and acting on feedback that focuses on your members and employees – can help your merged credit union avoid surprises and increase the chances for success. This can also help safeguard your reputation for the long-term.

Refining Your Communication and Reputation Strategy

How can you refine your overall communications strategy and manage your reputation before, during and after a merger? Ask yourself these key questions:

• What do you want to communicate?
• Why do you want to communicate it?
• Why is this partnership or consolidation happening now?
• Who are the existing and prospective members you want to communicate to?
• How/where (i.e., what channels of communication) will you communicate?
  • One-on-one meetings, phone calls, emails, newsletters, video, media and social media.
• When is the best time to communicate your message?