Article

Mergers as a Discipline

By Shawn Hanson

3 minutes

Mergers are a big deal to our industry and to Marine Credit Union in particular. Since I took the helm in 2000, more than 5,000 CUs have merged. Chartered in 1949 to serve employees of Mercury Marine of outboard motor fame, Marine CU has participated in 11 since 2000 and now counts almost 30 CUs as part of its family.

Mergers have been part of our growth strategy for a very long time, and I’ve long thought we were good at them. We have a standing team prepared to work on an integration project on short notice in addition to their regular duties. We’ve learned from our mistakes and follow a tested recipe. That level of competence has been good enough in the past, but the future is going to be different. We need to commit to continuous improvement and to treating mergers as a discipline, not a chance occurrence.

In the interest of “sharpening the saw,” I recently attended CUES’ inaugural Mergers & Acquisitions Institute at the University of Chicago’s Booth School. The institute was attended by directors, CEOs and senior executives from about 25 CUs and was outstanding for several reasons:

First, rather than dive directly into tactics, we spent a lot of time on strategy. We were challenged to map our strategy, develop our elevator speech and articulate what we don’t do and why. We discussed at length the concept of “adjacencies”—things near the core of our business, but not in it (CUSOs, anyone?). I thought I had a great sense of our “core,” but it is so much clearer now. The takeaway is: If you’re not clear on your strategy, how can you prospect, evaluate and negotiate a deal that supports it?

Second, we spent time on real-world M&A problems and case studies. This was not a “credit union” conference. This was real-world stuff with recognizable case studies, inside and outside of banking. Interestingly, many of the examples we looked at were of the “how not to” variety—deals that were clearly ill-advised when viewed in the rearview mirror. That perspective allowed us to debate whether these were just bad deals, poorly executed or both. We’re a little spoiled in CU land, where good deals come with 8 to 10 percent net worth attached. There are deals going on in the for-profit world every day absent that free money. Learning about the drivers of deal value outside the CU space is meaningful and will benefit us down the road.

Finally, as I’ve come to expect from CUES, the faculty was remarkable. Lead instructor Stephen Morrissette has a wealth of experience in banking and has been involved (on both sides) in a number of significant acquisitions. He challenged participants to answer the hard questions related to the cases we discussed and to follow a disciplined process for our own mergers.

The engagement and interaction among participants was beneficial. I made connections with CU professionals who have unique strategies, balance sheets and viewpoints, but we all share a belief that the consolidation of CUs will continue. The consensus was that by improving our understanding of what makes mergers work, we position ourselves to be proactive and craft strategies supporting our mission and overall strategies.

This experience will keep Marine CU more focused on its own strategy, the prospects that are most important and treating M&A like any other process. Consistent execution in business—including mergers—isn’t an accident.

I’m bullish on the future of CUs, but that future involves continuing consolidation. Our structure gives us unique opportunities to think longer term than most for-profit entities. Let’s have the conversation about where each of the 6,000 remaining credit unions will be in 10 to 15 years. How can we as leaders ensure we’re still relevant as an industry? How can we maximize the value we deliver to our member-owners?

CUES member Shawn L. Hanson is the CEO of $700 million Marine Credit Union, La Crosse, Wis.

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