Experience is the best teacher and it's also the foundation upon which best practices are built and validated.

In the realm of credit union mergers, many executives know about the importance of finding a merger partner with a similar organizational culture, mission statement and field of membership.

And while those fundamental elements are critical, credit union professionals shared some other best practices they learned through their own experience that may help others.

Robert D. Ramirez, president/CEO of the $1.5 billion Vantage West Credit Union in Tucson, Ariz., has been involved in a couple of mergers that perhaps many CEOs would have never considered.

In 1999, Ramirez got a call from the NCUA about whether he would assess merging with the $125 million Saguaro Credit Union in Tucson, which was conserved in December 1998 by state and federal regulators for not operating in a safe and sound manner.

"Their loan portfolio was solid but it was their investment portfolio that caused them some serious problems and they had been basically insolvent," he recalled. "They were a little aggressive in terms of what they invested in and it just went south on them. They had a negative equity of about $3 million."

At the time, Vantage West was managing about $250 million in assets and the credit union's capital would take a big hit.

But Ramirez learned that by going into a proposed merger with eyes wide open, he was able to spot a potential opportunity for future growth.

Because the credit union industry will continue to consolidate and mergers of equals may become more prevalent in the years to come, it's important for credit unions to develop a merger preparedness plan, according to Vincent Hui, senior director at Cornerstone Advisors Inc. in Scottsdale, Ariz.

The plan can help the credit union executive team think through all of the key elements of a merger, including what trade-offs are acceptable and not acceptable; who will be responsible for overseeing negotiations, due diligence, staffing, operations, conversion, and products and services; and what partners to bring on board to assist with the merger process.

"One of the worst practices is when the board and management can't agree on what the merger trade-offs are and what happens is that we can end up negotiating against ourselves," Hui explained. "And that, unfortunately, happens a lot of times. So that's why it's important to get your internal house in order first before you go out into the marketplace."

Read additional merger best practices insights from Ramirez and Hui in the March 30, 2016 print edition of Credit Union Times.

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