By Larry Cabaldon, Boardroom Performance Group
Publications & Resources
Mergers & Acquisitions
A merger, acquisition or consolidation is an excellent opportunity to strengthen your executive and board talent. Often acquirers will spend time, energy and money on the traditional areas: loan portfolio, contracts, IT, financial condition etc. but overlook the executive/board talent potential. This is a serious mistake.
During the ‘90s, we helped assess the executives/board on behalf of acquirers of community banks and thrifts. The largest was the merger of Security Pacific and Bank of America. We were retained at the vice chairman level to select executives for various business units that were being consolidated.
Here are the steps for a successful rehire process.
First, determine the main business objective. Is the objective to grow the business, minimize risk, maintain the business or sell as soon as possible? The objective determines the experience, skills sets and attitudes required for the leadership team.
Second, what kind of culture is desired? Is cost-cutting a key consideration? Is sales important or is loan restructuring? Do the executives and board need to rebuild relationships with the business community or is the bank to be closed?
Third, understand the leadership style of the executive leading the new entity. Is the leader a team builder, cost cutter, authoritarian or delegator? His leadership style will determine which executives and directors will fit the new entity.
Fourth, based on criteria developed, interview each executive as if he or she is a candidate for a job with the“new entity”.
After the interview, the new leader, based on the established criteria, treats each “candidate” with respectand acts as if he’s hiring a new executive. After he determines if the candidate is qualified, he describes and sells the candidate on the position. He will make an offer such as, “You will report directly to me and be responsible for sales and customer retention. I will pay you your current salary plus a 30% bonus and more if you bring in more customers. You can keep your office, your Olds ‘88 and 60% of your staff. If you are loyal to me, I will be committed to your success. Would you like to join me?”
Often the acquired executives are demoralized, defensive and emotionally traumatized. However, with this “rehire” process, the executives and board members are repositioned as valuable contributors who are now candidates for new positions. Candidates have a choice if they are offered a position. They can accept the position or leave for something more attractive. This elevates their self-esteem because they realize they have made important contributions and, in the new economy, lifelong employment no longer exists.
Executives and directors know how to hire and be hired. The rehire process embodies trust, communication,commitment, defined roles, goals and terms in a simple letter of agreement. In some cases, the CEO and key directors of an acquired bank are rehired to replace weaker talent and are able help propel the combined community bank to success.
Here’s another common scenario:
“Our investment banker convinced us this deal was too sweet to pass up,” said the chairman & CEO of a community bank. “We sent in our CPAs, attorneys and executive teams to conduct a major due diligence. We knew we could consolidate costs and combine our marketing efforts. We thought we pretty much covered all the risks, except one. Who was going to lead and produce the business?
“We should have spent more effort on the board and executive team,” he continued. “No one during the due diligence really talked to them. Sure, we had the usual dog and pony shows, meetings lunches, but it never got below the surface.
“A year later, we found that the president of the acquired bank was burned out – even before the acquisition, (some of key directors could have told us). We lost all the key people. At first we said good riddance – a great way to cut costs. But then productivity went to hell. It was ugly and financially devastating-and could have been avoided,” the CEO concluded.
Don’t waste the opportunity to strengthen your talent in merger, acquisition or consolidation. Treat those who leave with respect. They may be customers or referral sources in the future. Manage the talent as closely as you manage the loan portfolio. It’s too important not to.
Larry Cabaldon is CEO of Boardroom Performance Group. He can be reached at 949-477-8031 or firstname.lastname@example.org.
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