The Importance of Conducting Cultural Assessments to M&A Success
Written by: John Spillane, Donna Thaxter, and George DeMello
In the ever-transforming financial services world, the pursuit of mergers and acquisitions is gaining new momentum among Community Banks and Credit Unions. American Banker highlighted this growing interest in its June 2023 article as community-based institutions look for ways to navigate increasingly complex regulatory requirements and mounting capital investment costs, such as digital banking and risk management technologies.
While the strategic and financial aspects of M&A transactions typically receive substantial attention during M&A due diligence, the assessments of both organizational cultures and credit cultures are less tangible yet powerful factors that often receive limited consideration. This occurs despite mounting evidence that cultural alignment or misalignment often makes or breaks the success of an M&A transaction.
1. Community Banks and Credit Unions can significantly increase the likelihood of a successful merger when they prioritize the people and cultural aspects of the deal.
Human Resource professionals have emerged as critical partners during M&A due diligence by identifying business-critical synergies and potential cultural pain points. From this analysis, an integration plan emerges that targets resolution for material gaps and allows for leveraging important areas of alignment. While the ideal scenario involves initiating this process during due diligence, institutions, even those well into the post-merger phase, can benefit by assessing alignment strengths and misalignments and then developing a targeted action plan.
2. Credit culture, when looked at as a separate element of organizational assessment and alignment, is vital to the health of your core operational success.
Credit culture forms a second key component of cultural due diligence. A deep dive into credit policies, documentation, compliance protocols, and risk parameters is critical to understanding how well the merging organizations align. This analysis uncovers potential risks and equips stakeholders in proactively managing these risks and potential liabilities. Portfolio analysis aids in the identification of nuances of the organization’s lending practices. It ensures preparation for future challenges so that unforeseen liabilities do not overshadow financial outcomes and objectives associated with the transaction.
SCA, Your Strategic Partner for M&A Due Diligence:
Spillane Consulting Associates will guide you through M&A due diligence and integration planning. Our team comprises a diverse group of seasoned human resources, credit analysis, compliance, risk management, loan servicing, and technology professionals, each with deep industry knowledge and experience in navigating the challenges of mergers and acquisitions. We partner with our clients to develop a holistic approach beyond numbers. We recognize that successful transactions extend beyond financial synergies to the creation of a corporate culture that is unified and ready to move forward.
