Merger Success Begins with Soft Side Due Diligence

Credit union mergers are beneficial not only for the acquiring institution, but also for the institution being acquired, and the members and employees of both. Unlike many other business consolidations, credit union mergers produce positive results for all involved.

As a leader within your organization, it’s up to you to make the best move possible. But where do you start the merging process, and how do you know if you’re choosing the right company to acquire? The secret to a successful merger is using soft side due diligence for a strategic fit that benefits both parties.

The Importance of Performing Soft Side Due Diligence for a Successful Merger

Once your institution has made the decision to acquire another credit union, the process begins to look for an acquisition that will be a good fit. Evaluating differences, similarities, and company culture is one step in the process that will make the eventual acquisition successful if it is desired. Taking into account these soft issues before you proceed with the acquisition plans helps determine if the arrangement in question will flourish or fail. This is an important analysis step because mismatched consolidations cost credit unions significant time and money to correct. But when you include these factors from the start, you set yourself up for growth and success.

Things to Consider When Performing Soft Side Due Diligence

Before you analyze the specific soft issues when screening for the right institution, it is important to consider size – both relative and absolute. If the difference in size is large, then the smaller institution tends to absorb into the culture of the acquiring institution. However, the problem with mergers occurs mostly when the two involved institutions are close in size. In this situation, it becomes more difficult for the cultures to blend, and the significance of soft issues increases. So, what are these soft issues you should analyze in the process of screening targets? While there are several that could be included based on your institution’s specific goals, here are four basic factors to consider when screening targets for your merger.

• Operational Philosophies – Some differences are to be expected, but if the institution you’re considering for a merger operates in a way that is drastically different from your own philosophies, then it’s likely the consolidation will have added challenges.

• Organizational Culture – What are your institution’s mission statement, goals, and vision? How do you handle employee relations? Each of these should be considered in conjunction with the same factors of the targets you’re screening.

• Member Service Policies – Similar to organizational culture, the way in which a credit union deals with its members says a lot about its integrity. Do they have policies similar to yours? If not are they willing to consider new policies?

• Community Reputation – The last thing you want to do is join forces with an institution that has a bad reputation in its community. This is detrimental to your own reputation and in turn, your growth.

Corporate culture, compensation, and benefits are the primary reason people value their place of employment. During a merger it is important to keep existing employees informed to the extent it affects their positions as the due diligence is performed.

When it comes to completing a mutually beneficial credit union merger, soft sided due diligence is crucial. Determine if the consolidation is a good fit before the deal is done by analyzing the soft issues listed here. By doing so, you will save your institution time and money, ensuring the success of the merger and the growth of your future organization.