LAS VEGAS -- Apparently mindful of economic uncertainty facing the industry, credit union directors packed a meeting room at the Venetian Resort and Casino last week to take part in a four-hour educational session on the pros and cons of mergers. Costs, culture change and deal breakers emerged as the hottest topics.
The workshop session, held at the 31st annual National Directors' Convention, was led by Denver merger consultant Ronald Nice and Alan Peppers, president/CEO of Westerra CU, which over the last several years has completed a series of consolidations in the Colorado market.
"I think the issue and the motivation uppermost on the minds of those directors was how to strategically grow my credit union in this environment and is a merger the answer," observed Nice, who heads up a firm bearing his name. He, together with Westerra, has been offering a specialized merger kit to would be suitors, particularly mid-sized CUs.
Discussed at the session, entitled "Mergers 101: Plan for Opportunity," was the feasibility of CUs growing new revenue through third parties, CUSOs or shared facilities, all seen as viable alternatives to mergers, officials said.
But Nice and Peppers suggested that those endeavors have their limits in the current economic climate, and therefore, CUs should be open to merger possibilities while retaining realistic attitudes.
"One of the biggest stumbling blocks to consummating a merger is the lack of communication and/or the lack of trust between the parties," maintained Nice.
In his remarks, Peppers of Westerra cautioned directors about confidentiality as merger discussions take place.
"You never negotiate in the streets," warned Peppers contending loose comments before full boards know about merger plans can quickly sink consolidation proposals or poison the atmosphere. Discussion of merger proposals must be undertaken slowly with a widening pool of chairmen and directors understanding the plans before the plan goes to the regulator. Otherwise, the merging CUs run the risk of seeing the consolidation fall apart before getting off the ground, he said.
As part of their presentation, Peppers introduced Westerra directors to the workshop audience, inviting directors to quiz them privately or publicly on how merger negotiations are transacted.
"Uppermost in your mind must be: What is the true value to the member?" concluded Nice.
--jrubenstein@cutimes.com
