merger & acquisition planning

Merger and acquisition planning is an important component of your strategic planning. Whether you are a buyer, seller or watching from the sidelines, it is important to keep on top of what is happening. Over the past several years, there have been more than 250 bank acquisitions annually. Community banks with total assets of less than $500 million have been involved in more than 75 percent of these transactions. And these smaller community banks participated as acquirers in nearly one-third of all bank merger and acquisition transactions. Bank CEOs, CFOs and their boards should know how their strategic plan is impacted by mergers and acquisitions. You should know who you could acquire. You should know who could acquire you. And you should know if there are true merger partners out there. You need to know who, how and when - if ever.

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Your M&A planning process needs to be disciplined and comprehensive. Whether you incorporate mergers and acquisitions as an active and key component of your strategic plan or only carry out an acquisition every few years, the M&A planning process will be similar.

The following are key elements of the M&A planning process:

  • Fit or alignment with your Strategic Plan.

  • Development of a merger strategy - geographic, business or product, turn-arounds, etc.

  • Documented merger and acquisition policy and procedures.

  • Assessment of your organization's "merger readiness" and actions to be taken to become "merger ready".

  • Identification of merger and acquisition candidates or partners.

  • Development of a merger integration plan.

  • Post-merger review and assessment - what worked and what did not work.

Keys for Success:

  1. Develop a merger and acquisition policy that fits with your organization, your business and your risk limits.

  2. Evaluate your "merger readiness" across all of your departments well ahead of venturing into an acquisition.

  3. Identify your post-merger organization structure and integration plans prior to initiating merger and acquisition discussions; there needs to be single vision of the combined organization.

  4. A great acquisition can be undone by a high price; know when to walk away.

  5. Have fun!


Strategic Plan

Your Strategic Plan should include a statement on the role of merger and acquisition strategy in your plan.

Merger Policy & Strategy

There should be a Merger Policy that lays out roles and responsibilities, authorization levels and key steps and procedures.

Merger Readiness Assessment

Merger Readiness is often overlooked, but is one of the most important aspects. Nearly every department or function within your organization will be impacted by a merger or acquisition. Each department or function needs to know what their roles and responsibilities are during each phase of a merger or acquisition – and ahead of any specific transaction.

Merger Timeline / Calendar

Acquisition process timelines can surprise organizations. Sometimes these can move from initial review to final agreement in less than two months. Therefore, you should create a standard planning timeline for the various phases of a merger or acquisition - updated for any specific acquisition. Many members of your merger and acquisition team will be pulled off of their “day jobs” to participate and need to recognize ahead of time as to how quickly the process may need to move.

Merger Candidate Identification & Assessment

There are a variety of means to identify merger and acquisition candidates. The primary method should be that management and the board of directors identify candidates. If you have given adequate thought to your Merger Strategy, you should know where you want to be and who you should be contacting. Your team should have the capabilities to run forecasts, perform due diligence and understand valuation and merger economics.

Risk Assessment and Due Diligence

This is a very important step. While you have reviewed some information already, this is your opportunity to dig deep into the information and to validate your preliminary findings or to raise issues that you previously were unaware. This step needs thorough documentation and should be carried out by staff with expertise and experience in the areas under review during due diligence.

Merger Business & Financial Forecast

In the end, all of this information needs to be translated into a business and financial forecast (+ 5 years) that allows you to place a value on the company and to determine if the acquisition achieves your financial goals contained within your Merger Policy. Your investment banker will assist in pricing the acquisition, but should not be expected to contribute to the financial forecasting. You may seek a consultant to assist you in preparing the financial forecast and analysis. But, again, these must be “your numbers” and your best view on the future prospects for this acquisition.

Merger Integration

While overpaying for an acquisition will result in a poor outcome, another key success factor for acquisitions is your merger integration planning and implementation skills. There is a real cost to carrying out a merger integration. Poorly executed merger integration will cost substantially more. It will jeopardize any merger cost savings or revenue growth. More importantly, it will negatively impact the customers and communities that you are hoping to serve and the employees of both the company being acquired and of your organization. Likewise, a well-executed merger integration will be recognized by all parties.

Post-merger Assessment

At the six-month anniversary of the completed merger integration (not merger closing), there should be a post-merger assessment of all elements of the acquisition process. What went well? What needs improvement?