BOD 3-1 Mergers: Structure, Process, and Benefits


WE’VE ALL SEEN THE HEADLINES. HOW CONCERNED SHOULD YOUR
CREDIT UNION BE? MERGERS BETWEEN CREDIT UNIONS
ARE COMMONPLACE IN THE INDUSTRY TODAY. AS IN ANY OTHER BUSINESS OR
INDUSTRY, SOME ARE SUCCESSFUL WHILE OTHERS ARE NOT. THIS BOARD OF DIRECTORS’ VIDEO
WILL EXPLORE THE ISSUE FROM THE MERGING CREDIT UNIONS
PERSPECTIVE. WE WILL EXAMINE CURRENT
TRENDS IN CREDIT UNION MERGERS, DETERMINE WHEN A MERGER IS IN
THE BEST INTEREST OF THE CREDIT UNION, OR NECESSARY TO
CONTINUE OPERATIONS, AND DISCUSS HOW TO NEGOTIATE A
MERGER AGREEMENT THAT IS IN THE BEST INTEREST OF THE
CREDIT UNION. MERGERS ARE TYPICALLY STRUCTURED LIKE
THIS: THE CREDIT UNIONS RESPECTIVE MANAGEMENT TEAMS
FIND A MERGER PARTNER. THIS IS USUALLY DONE THROUGH
PROFESSIONAL CONTACTS OR BY NCUA. NCUA MAINTAINS A REGISTRY OF
CREDIT UNIONS INTERESTED IN MERGING WITH OTHER CREDIT
UNIONS. MANY MERGER ISSUES CAN BE
NEGOTIATED BETWEEN THE TWO CREDIT UNIONS. MORE DETAILS TO FOLLOW LATER
IN THIS VIDEO. NCUA AND THE STATE SUPERVISOR
IF ONE OF THE MERGING CREDIT IS STATE CHARTERED, WILL
CONSIDER THE MERGER PROPOSAL BASED ON A VARIETY OF FACTORS
LIKE: CHARTER TYPES, FIELDS OF MEMBERSHIP, NUMBER OF MEMBERS
AND FINANCIAL CONDITION OF THE CREDIT UNIONS. A MEMBERSHIP VOTE, BY THE
MERGING CREDIT UNION, MAY BE REQUIRED IF NCUA APPROVES THE
MERGER, THE SURVIVING CREDIT UNION ASSUMES THE ASSETS, SUCH
AS LOANS, INVESTMENTS, EQUIPMENT, AND BUILDINGS AS
WELL AS THE LIABILITIES AND SHARE ACCOUNTS OF THE MERGING
CREDIT UNION. AT THIS POINT THE MERGING
CREDIT UNION NO LONGER EXISTS. A MERGER CAN AND SHOULD BE
PART OF THE PLANNING PROCESS. DO REMEMBER, MERGERS DO NOT
NECESSARILY EQUAL FAILURE. THERE CAN BE MANY BENEFITS TO
A MERGER, EVEN FOR THE MEMBERS OF THE MERGING CREDIT UNION. THE BENEFITS OF A MERGER CAN
INCLUDE: IMPROVING THE CREDIT UNIONS FINANCIAL CONDITION
THERE ARE CLEAR ECONOMIES OF SCALE DUE TO SIZE. THE LARGER CREDIT UNION THAT
RESULTS FROM A MERGER CAN TAKE ADVANTAGE OF THESE TO IMPROVE
THEIR FINANCIAL CONDITION. HELPING TO EXPAND MEMBER
SERVICES FREQUENTLY THE SURVIVING CREDIT UNION IS MUCH
LARGER THAN THE MERGING CREDIT UNION AND LARGER CREDIT UNIONS
TYPICALLY PROVIDE MORE SERVICES. EXPANDING FIELD OF
MEMBERSHIP FOLLOWING THE MERGER, THE SURVIVING CREDIT
UNION SERVES BOTH FIELDS OF MEMBERSHIP. ENSURING SUCCESSION PLANNING
SMALLER CREDIT UNIONS CAN HAVE DIFFICULTY ATTRACTING
QUALIFIED STAFF AND VOLUNTEERS MERGING CREDIT UNIONS MAY
NEGOTIATE RETAINING THEIR NAME AS “A BRANCH OF…”, AS WELL AS
KEEPING THE OFFICE LOCATION. IN THE NEXT SECTION WE’LL TALK
ABOUT: RECENT MERGER TRENDS THE DIFFERENCES BETWEEN
VOLUNTARY AND INVOLUNTARY MERGERS AND WARNING SIGNS THAT
IT MIGHT BE TIME FOR MANAGEMENT TO CONSIDER MERGER .

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