A survey of executives involved in M&A deals conducted by Mercer revealed that 75% cited “harmonizing culture and communicating with employees” as the most important factors for successful post-merger integration. This is what I refer to as the “softer” side of M&A, i.e. people…specifically employees… “yours and theirs”… “us and them.” This is the part of M&A that can negatively impact the success of an acquisition over the long term financially, strategically and reputationally. Sometimes it is immediately obvious, but many times the consequences are manifested a few years down the road.

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April 20, 2015 by: Debi Barnes, Principal
So you’ve decided to get into the sport of M&A. There’s nothing quite as
exciting. First the hunt…next you find the target…then negotiations
start…you make the deal…and ultimately you win the game with a
“successful” agreement. It’s enough to get most bankers’ adrenalin
pumping just thinking about it. All you have to do now is close the deal
and merge your systems, right?
Not hardly. A survey of executives involved in M&A deals conducted by
Mercer revealed that 75% cited “harmonizing culture and communicating
with employees” as the most important factors for successful post-merger
integration1. This is what I refer to as the “softer” side of M&A, i.e. people…specifically
employees… “yours and theirs”… “us and them.” This is the part of M&A that can negatively
impact the success of an acquisition over the long term financially, strategically and reputationally.
Sometimes it is immediately obvious, but many times the consequences are manifested a few years
down the road.
In working with bank clients, I have seen the aftermath of acquisitions that underestimate, and
sometimes don’t even consider the risks associated with inadequate attention to M&A’s softer side.
Depending on the study you quote, anywhere from 50 to 80% of acquisitions fail to meet
expectations. The beginning place to address this risk is with an acquisition communications plan. A
good written acquisition communications plan can help you avoid the pitfalls and give you every
chance of being in the “expectations met” category. Here are a few of the things every bank
management team needs to know and consider when thinking about the softer side of an acquisition.
1) Communication is not the same as information. Many bankers confuse those two things when
it comes to “communicating” with employees during an acquisition. Information is about providing
facts and it is one-way—from you to the employees. Communicating is about making a connection,
calming fears and providing an opportunity for two-way dialogue. As anyone who has been through
an acquisition knows, providing facts, or information, is not always easy in the early stages because
there are so many unknowns. But that doesn’t mean that you can’t, or shouldn’t, be communicating
with the employees as soon as possible. Questions like “Will I have a job?” or “What happens to my
vacation?” looms heavily on their minds. Acknowledging their concerns and providing them with a
vehicle to ask questions (even though you may not have a definitive answer) will go a long way while
you are trying to make those decisions. Let them know that you are engaging with their concerns by
communicating, and two-way dialogue should be part of it. A written acquisition communication
plan is a good first step in making sure you communicate even when information is limited.
2) You can never over communicate. When visiting with clients about the importance of
communication, I use the joke about the couple who had been married for 50 years and the wife
complained to her husband that he never told her he loved her anymore. His response was “I told you
I loved you when I married you, and if I change my mind I’ll let you know.” This is the same
mentality I often hear from banks that culturally operate on a secretive or “need to know” basis
regarding communication. It might work in your current bank environment (although I doubt it) but it
introduces a high level of risk in the acquisition process. There are many questions and decisions that
DD&F Whitepaper:
The Softer Side of M&A

2. DD&F Whitepaper April, 2015
The Softer Side of M&A
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have to be made that impact the employees of both banks, and assuming employees don’t need to
know until you are ready to tell them is detrimental. Obviously there are limits in what can be said
throughout the process but once an agreement is announced, anxiety for employees sets in and can
fester without timely communication. Buyers and sellers should work together to ensure that you
have an acquisition communication plan that addresses employees questions and concerns, and you
should begin before the ink dries on the agreement.
3) If you don’t communicate and control the message, someone else will. It’s amazing what
people can fabricate when left to their own imaginations. That’s why it is important to anticipate
questions and prepare key messages to address those questions from the beginning. It is critical to tell
your story even if you are early in your story and you don’t have all of the answers yet. When you
don’t control the message, the rumor mill takes over and creates the message. This results in
increased risk for attrition of good people you may want to keep. To make matters worse, it can filter
out to your new customers and the community, potentially damaging your bank’s image and the
franchise you are acquiring. Your acquisition communication plan should include key messages for
all audiences including employees of both banks. You want employees to know that you are being
forthright and even if they don’t like what they hear, they will understand that you will keep them
informed as things progress and decisions are made.
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4) Not making tough and timely decisions regarding employees and management is a decision.
A BAD decision. It’s hard to tell someone they won’t have a job but in the long run it is sometimes
the best thing you can do in an acquisition situation. In fact, the sooner the better. Your acquisition
communication plan should develop a strategy for timely communication with various groups of
people, including:
 Employees that you want and/or need to retain—such as that stellar loan officer or branch
manager. They are the ones your competitors go after first.
 Employees that you need to retain through conversion because of their knowledge of the
acquired bank’s systems.
 Employees of the acquired bank that you do not need nor want to retain from the date of
closing.
 Management (and board members) with perceived community influence.
An acquisition is an opportunity to reap the benefits of retaining valuable individuals who can
strengthen your organization, even when you have to rearrange your own organization chart. But it is
damaging to the success of the acquisition to not make the needed adjustments to job responsibilities,
job titles and lines of authority for fear of hurt feelings or perceived negative consequences. This is
fodder for distrust, territorialism and poor morale.
Be committed to make your staffing decisions and define your new organization based upon a fair
and honest assessment of the staff of both banks and what is best for the new, combined entity going
forward. And as soon as possible, communicate these decisions to every employee so that they know
and understand how the new structure will work and where they will fit (or not fit) into the
organization. Although much of this communication may be confidential (conveyed by one-on-one
conversations, not an email), how and when you will communicate and execute these sensitive issues
should be a part of your acquisition communications plan.
5) OJT doesn’t work. Written procedures and ongoing training is essential. You cannot
assume employees will know what to do or learn from word-of-mouth communication and training.
Even if you tell them, old habits die hard and without written guidelines and proper training they will
go back to their old routines if possible. This is true in your current organization and it is absolutely

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The Softer Side of M&A
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true in an acquisition. Poor or nonexistent procedures for everything from how to handle NSFs to
opening new accounts to putting loans on the books will create inconsistencies in how your bank
operates. This creates the potential for an adversarial “us vs them” situation between the legacy
employees and the acquired employees that can be hard to overcome. It may have worked before, but
factor in new employees, working with new systems for a new bank and this spells d-i-s-a-s-t-e-r.
If your bank is an acquirer, this is the perfect time to make sure you have written policies and
procedures in place that are scalable to a new, larger organization, and a planned training program to
go with it. Don’t assume that the way you’ve always done it will work in a larger, perhaps
geographically separated organization. A best practice is to evaluate your current procedures as well
as the acquired banks procedures and use work groups during the integration process to develop
procedures that work for the new, combined organization. Foster an “it’s not your way, or their way,
but rather the best way” approach to integration with participation of employees from both banks.
Not only will everyone be more likely to be able to understand how things are going to be done, but
they will also be more engaged and willing to adapt to the changes that are necessary.
6) Employee cultural integration is a process, not an event. Often bankers focus on the
acquisition itself and once the new organization chart is completed, and technology and core systems
are consolidated, they breathe a sigh of relief that the bank is “integrated.” Nothing could be further
from the truth. The real truth is that with every acquisition there are winners and losers, regardless of
what you call it. Employees figure this out quickly so it is important to begin the process to
neutralize this mentality as soon as possible. I use the word “process” because when it comes to the
employees, it takes time to combine two separate entities and belief systems into one “culture”.
Companies that understand this and have had success in building a unified culture say that they
expect it to take 2-3 years to fully integrate two cultures, and that is with a lot of intentional and
sustained effort.
Many banks don’t understand this. Potential consequences include high turnover, operational
inefficiencies, deterioration of service quality for customers, poor morale and a damaging “us vs.
them” mentality. Unfortunately, these issues do not always fully manifest themselves until a year or
more after the acquisition. Bankers can convince themselves that all is well when it really isn’t. At
some point in time the problem becomes evident and you find your bank embroiled in a mess.
So how do you combine two different cultures? It isn’t easy. It requires taking specific actions to
fully integrate employees and it takes time. You can start by defining the differences between your
bank’s culture and the acquired bank culture at the beginning of the acquisition process and take
specific steps to address cultural differences at that time.. Working to understand and even
“integrate” components of the acquired bank’s culture is something you should consider. For
example, if they have specific community events they are known for, you could you continue them
and even incorporate them into all of your markets. Or if they have a long held employee tradition, is
it something you could continue and include everyone?
In addition, it helps to commit yourself to developing a culture of communication and telling your
story. You can never tell your story too many times. In fact, research has shown that people need to
see or hear something at least 7 times before they begin to believe it and internalize it. Make sure you
have a story about who your bank was (its history) and who it is today, and what you want people to
believe about the bank. We call that the Brand Promise. To make it real, employees have to believe
it and live it. The way to help them do this is to make it an important part of your communication at
every opportunity. Beyond that, to ensure success over the long term, include ongoing and consistent

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employee communications and regularly scheduled post acquisition activities and training that
reinforces your bank’s culture and provides employees with opportunities to engage with each other.
The bottom line is that paying attention to The Softer Side of M&A is critical to the long term success
of your acquisition. A written acquisition communication plan will help you identify and mitigate
communications risks from pre-acquisition through conversion and beyond-- ensuring that your bank
puts its best foot forward with your new employees, customers and communities.
1
2004 Mercer survey of executives involved in M&A deals as quoted in 3 Failed Mergers and What They Reveal, Axial
Forum, January 23, 2014; http://www.axial.net/forum/3-failed-mergers-and-what-they-reveal/
About the Author: Debi provides marketing expertise with a specialized focus of assisting DD&F clients with
sensitive strategic marketing and communication issues related to new market entry, name changes, merger and
acquisitions, FDIC assisted acquisitions and regulatory agreements. She has over 35 years of experience in
banking and bank marketing to include strategic planning, advertising, branding, public relations, product
development, pricing, conversion and consolidation, research, database and web marketing, service delivery and
sales. She holds a B.A. in mathematics from Hendrix College, Conway, AR and is a graduate of the Graduate
School of Bank Marketing, University of Colorado, Boulder, CO. She is past Director of the Arkansas and
Kansas-Missouri Chapters of the Bank Marketing Association and has been a speaker at the national American
Bankers Marketing Conference on M&A Communications.