Governance Practice: Selecting a Merger Partner

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Governance Practice Selecting a Merger Partner
Danny Cloghan
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Selecting a merger partner
About United

• Commenced 36 years ago
• The product of 30 mergers from 1972 1989
• 1989 near death experience
• 1990s survival, recovery and cost control
• 2003 2006
• Period of renewal and change
• Significant investment in people, culture,
  infrastructure
• New vision and strategy to achieve vision

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Selecting a merger partner
Uniteds New Vision
To be a distinctly different provider of
financial services, differentiated by our
commitment to making a significant contribution
to the well-being and economic independence of
our members and West Australian communities.
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Selecting a merger partner

• How is this vision different from the banks?
• We aim to be WAs leading member based, socially
  responsible, banking institution.
• Flexible, consultative, focused on communities,
  and offer a more personal and genuine level of
  service that cant be found anywhere else.
• Our members own the organisation, hold us
  accountable for our performance, and have a say
  in where our profits go.

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Selecting a merger partner
Development of strategy

• Considerations
• Environmental issues
• Key stakeholders
• Strengths, weaknesses, opportunities, threats
• Priorities and accountabilities
• Structure, ownership and resourcing

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Selecting a merger partner
Development of strategy

• Aim To steer United in a direction which would
  be both sustainable and would maximise benefits
  for members
• Need to have a point of differentiation which
  would have appeal to the market and be aligned to
  our values.

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Selecting a merger partner
Uniteds SoVac

• United Values
• Openness
• Integrity
• Accountability
• Humanity

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Selecting a merger partner
Living the Values
Uniteds Commitments 1. We will provide
financial and related services responsibly and
with integrity. 2. We will provide members with
outstanding service to help them achieve their
goals. 3. We will seek to demonstrate leadership
in the community to create opportunities for
positive change.
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Selecting a merger partner
Living the Values

• Uniteds Commitments
• We will actively provide opportunities for
  members to have a say in the direction of their
  Credit Union.
• We will provide a great place for our employees
  to work
• 6. We will be accountable for delivering on our
  commitments.

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Selecting a merger partner
Vancity good practice credit union

• Mission and Purpose
• To be a democratic, ethical and innovative
  provider of financial services to its members.
  Through strong financial performance, serve as a
  catalyst for the self-reliance and economic
  well-being of its membership and community

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Selecting a merger partner
Does the VanCity Proposition Resonate with West
Australians?

• United conducted both qualitative and
  quantitative research to assess appeal of the
  proposition here in WA.
• Key findings
• Proposition could attract up to 19 of adult
  population in WA
• Proposition has broad appeal and particularly
  resonated with Generation Xs and Ys and
  community-minded individuals
• Sufficient points of distribution (particularly
  ATMs) was a base requirement to be considered as
  an alternative
• People wanted to be valued by their bank and
  rewarded for the ongoing patronage

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Selecting a merger partner
What is Required to Achieve the VanCity
Proposition?

• A Banking organisation with
• Scale
• To gain required economies of scale
• To increase points of distribution and be
  considered a viable alternative to the main banks
• Commitment to Mutuality
• Points of differentiation (niche)
• Visibility and Credibility
• Passion
• Swift action time of the essence

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Selecting a merger partner
The case for a merger

• United aspires to be a Vancity
• We have the passion and the commitment to
  mutuality, members and community
• We could try to go it alone but this would take
  time because to achieve the market opportunity we
  needed
• Visibility and credibility
• Capital for achieving distribution plans,
  marketing and provision of the scale needed

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Selecting a merger partner
Areas for evaluation of attributes of potential
partners

• Governance and risk management
• Financial
• Business structure
• Vision and Values
• Community involvement
• Organisational culture
• Business plans
• Member benefits
• Market share
• Technology

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Selecting a merger partner
Evaluation methodology - The pool of
potential partners were compared on the following
criteria
Structure Commitment to mutuality Member first
principles WA identity Capital
position Sustainable business model Values
Commitments Philosophy Values Ethical
standards Existing social charter Existing
contribution to community Willingness to retain
and enhance the supportive spirit of mutuals
Organisational Culture Compatibility of
cultures Experience, established business Track
record and capabilities People culture and
policy Career Progression Empowerment model Sales
v service balance Recruitment linked to
values Governance standards Business model
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Selecting a merger partner
Establishing the minimum position

• During the initial process we realised that we
  would not be able to fulfil ALL of our ideal
  attributes with any one partner so we developed
  the minimum requirements around
• Mutuality
• Constitution
• Implementation of the business model
• SOVAC
• Foundation
• WA presence
• Community leadership

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Selecting a merger partner
The next steps we took

• Desktop assessment
• United CEO met with CCPS CEO for initial
  discussion which confirmed our findings that CCPS
  was a good partner for United
• Representatives of the two Boards met and
  verbally agreed to begin the merger process
• MOU signed
• Due diligence / project to merge commenced
• Public announcement and application to APRA

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Selecting a merger partner
What we have done well

• We selected our partner well. CCPS is compatible,
  strategically aligned, sustainable and culturally
  similar to United
• The evaluation process was undertaken in a
  methodical and robust way
• The merger process has been conducted using
  project management methodology
• The partnership we have formed with CCPS is
  working well and team building at all levels is
  sound

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Selecting a merger partner
Lessons learned

• Choose well selection of a potential partner not
  quite right for you takes up a lot of time and
  resources
• Its very hard to keep a secret. The longer the
  process takes the more likely it is that you will
  have to inform staff and the public before you
  would ideally like to. Plan for this.
• Keep regulators informed at all stages of the
  process
• Work with your staff and members to keep them
  informed