Does Your Board Governance Provide a Framework for Addressing Mergers?

Most important decisions in life require a framework from which you can understand the full picture and gain insights regarding the pros and cons of the pathways that lay before you. This is certainly true in the credit union world, particularly in concerns of potential mergers. However, according to a study commissioned by CEO Advisory Group, only 24% of respondents indicated they have a framework in place for considering merger proposals within their board governance policies. This means three-quarters of organizations are flying without a net, so to speak.

With this in mind, let’s explore the importance of having mergers addressed within board governance policies.

Why Would You Need a Framework for Addressing Mergers?

Frameworks are more loosely defined than formal policies. This can be beneficial for many organizations because it leaves a lot of leeway for things to change and adjust over time. The rigidity of formal policies can make it difficult to be flexible when the need arises, often becoming the grounds for one (or both) parties to reject the idea of a merger.

A framework, on the other hand, simply provides a guide by which you can make decisions, should the opportunity for a merger present itself. It should still be fairly well constructed, as a policy that’s too loosely written is reasonably useless most of the time.

The purpose of a framework is to address the components of a merger that can come about in the early stages of a credit union merger discussion. It might include elements such as confidentiality agreements, strategic planning, and succession planning. The point is to gain a wide view of the existing credit union and the opportunities and benefits that could arise down the road.

Viewing Mergers from the Right Vantage Point

While it’s true that most credit union leaders don’t want the world to know they’re open to the possibility of a merger, the fact is, the outcome can be very beneficial for all involved. Employees, members, and the greater community can benefit from a merger when the right framework is put into place from the very beginning.

It all starts with the value mergers can bring the very people each credit union is there to serve. Think about the successful mergers that have occurred in recent years. What made them successful? What benefits were they able to bring to the table, which left the newly formed organization stronger than the two parts it was before the union?

Examining the successes of those who came before you can help you evaluate your own credit union’s needs, desires, and expectations. There is no one-size-fits-all checklist, which is why it’s important to evaluate your framework at least once a year so you can make adjustments that fit within the context of your company’s culture and growth goals. Hiring a consultant who specializes in credit union mergers—even long before it becomes a viable option for your organization—can ensure that you have the framework built out to address issues, questions, and concerns, in the event conversations are on the horizon in the future.

The worst thing you can do for your credit union is to be unprepared. Without a proper framework in place within your board governance policy, you could find yourself susceptible to less-than-optimal circumstances if another credit union approaches you for a merger in the future. While these may be uncomfortable conversations to have in the moment, the foresight you’re bringing to your organization can reap great rewards.

If you’d like to gain further insight into credit union mergers and the takeaways gleaned from CEO Advisory Group’s study, download our free white paper.