Address M&A in Strategic Planning

What’s the one issue all credit union strategic plans should address?

Bill Handel: Think ahead about potential merger partners. "You'd rather select your partner than be forced to dance with someone you don't know."

Mergers and acquisitions, says Bill Handel, vice president of research and development for Raddon Financial Group, Lombard, Ill.

“We believe the merger activity in this industry will speed up dramatically, forced to a certain extent by the National Credit Union Administration because it won’t be willing or able to bear the cost of failure,” he says. “And there will be a number of failures. So it behooves credit unions to be more proactive in thinking about what they’d look for in terms of a merger partner, especially if they’re healthy.”

Handel suggests examining how potential merger partners would fit with your credit union in terms of your membership, market, and how you operate. “Make sure part of your planning efforts in 2009 have to do with mergers and acquisitions, even if you don’t believe in it. This is something that could be forced on you. You’d rather select your partner than be forced to dance with someone you don’t even know.”

Regulatory agencies can’t force credit unions to take on merger partners, he adds, “but they can strong-arm it enough that it can feel like it’s being forced on you. Don’t be caught off-guard. Think about the process you’d employ to effectively absorb or join with another organization. And make sure your board understands why this may be a necessity.”

Another issue to address: “rationalizing your delivery system,” Handel says. Credit unions have expanded their branch networks rapidly for the past 10 years in response to competitive pressures. It’s time to re-examine how to provide traditional branch services, whether via branch, online channel, call center, or mobile services.

“You need to make sure these channels make sense, and not just throw out there whatever new channel comes along,” he says. Also, “put more autonomy in the hands of people who manage the branches, especially if the branches are far-flung. These are the people who ultimately are responsible for the success of these locations.”