Bank M&A: Big Day and Big News – you’ve sold the bank!

Your board has approved the transaction, and the buyer will be seeking approval of the transaction from their board as well.

The two meetings are typically scheduled very close to one another from a date and time perspective.

Once both approvals have taken place, it’s time to share the news.

You’re about to announce that you’re selling the bank.

The audience for the announcement, for both you and the buyer, consists of the following:

• Management team
• Employees
• Advisory board (if applicable)
• Media
• Customers

This is really the first coordinated effort between the two banks. It is the first step in the process of each party talking about “us” and “them,” eventually evolving to just talking about:

“Us.”

In a perfect world, the two organizations would have collaborated for a month on the message and on the communication plan.

It would be well-choreographed and ready to roll out.

Everybody’s questions would be answered in a timely manner.

In the real world, however, it just doesn’t work that way.

Likely, what will happen is two or three days before the board meetings, there will be a very general conversation between the two parties on how the announcement should take place.

There may be some strict communication requirements you need to incorporate into your planning, those that a public company must adhere to.

An example would be the announcement is made after the market closes for the day so filings can be made before the market opens next.

If that is the case, those will need to guide the announcement process.

The message, however, needs to be coordinated with the buyer.

They may, or may not, share their message with you.

You will need to share yours with them for their prior review.

The two messages don’t have to be exactly alike, as there are two separate organizations talking about the upcoming merger.

It’s expected to see both a buyer’s, and a seller’s perspective, they should both be positive and generally use the same overarching themes.

Keep in mind that you have been aware of a possible transaction and have gone through the process for quite some time now, but this is the first time that the audience has heard about this.

Most people have no idea of the process involved in getting to this point and most people have no idea about the process that comes next.

It is their perception that once this announcement is made, a switch gets flipped, signs get changed, and the world starts as if their bank is now a part of another bank.

To them, it’s as simple as night becoming day.

It is important to understand this view and to work from there.

The best advice I can provide regarding this is to think through the message that your employees, your customers and your shareholders need to hear.

Build that message and refine it.

As has been mentioned previously, keep in mind that the merger hasn’t officially happened yet.

There are some things that are outside of your control that could delay things or even prevent them from happening.

Something could happen from a big picture perspective that could impact it—another pandemic, for example.

Regulatory approval could prevent it from happening.

A problem with the seller that presents itself unexpectedly.

A problem with the buyer that presents itself unexpectedly.

Fraud involving a large borrower could be an example of this.

Prepare for the worst and hope for the best.

The key word is “prepare,” which doesn’t mean “act.”

It is important to understand the message needs to be disciplined and not overly expressive about the combination.

Keep it business-like.

You don’t want to make it so expressive that a change in course creates the need to embark on a whole new campaign trying to resurrect your brand as a stand-alone brand.

You will want to communicate how this merger came about.

What your customers, employees, and shareholders will be most interested in is the answer to this question: “Why is this happening?”

Next, they’re going to want to know how this affects them.

And when is it happening?

Keep in mind, they have no context, so they think this is happening tomorrow.

A flipped switch, remember?

You’re going to have to set expectations.

What can they expect from the new combination?

How will they benefit?

As mentioned previously, your shareholders’ first questions are:

“How much is my stock worth?”

“When do I get my money?”

Your employees’ first questions are:

“What does this mean for me?”

“Do I still have a job?”

“What will my pay be?”

Your customers’ first questions are:

“How does this impact my business?”

“Will I still be working with the same people?”

“Will the products and services we use still be the same?”

You’re starting to get an outline here.

The timing of your announcement, as previously discussed, will need to be coordinated with the buyer.

You may wish to have a smaller meeting with the management team to prepare them first.

After all, they are going to be getting asked the same questions by their team immediately following the “all- employee” announcement.

It will be better to have them in the loop prior to the announcement even if it is two or three hours. It will give them some time to begin to digest the news.

If you have CICs and Stay-Put agreements with the team, they will likely be leaning into the announcement since they will benefit from the merger.

If so, remind them of the confidentiality clause in their CICs and not to jeopardize their benefit.

Again, emphasize the importance of not letting word get out in advance of the meeting.

Additionally, if you have gotten Insider Agreements from your board and your deal team, it would be wise to have each member of the management team sign one at the start of the meeting, prior to sharing the message.

You can explain to them that you have important information you wish to share, but to hear the information, they will need to sign the agreement as each individual board member did.

Allow them time to read it and to ask any questions about the agreement before they voluntarily sign.

I am not a lawyer, so it is strongly recommended that you seek legal counsel on your Insider Agreement.

Later in the day, in the case of a public company buyer, just after the market closes, you will likely hold your “all-employee” meeting.

The buyer may wish to attend your meeting, so there will need to be some coordination there.

Again, follow the buyer’s preference.

But always keep in mind the deal isn’t done yet.

A savvy and experienced buyer will handle it in this fashion as well.

If you are dealing with a particularly pushy buyer wanting to move beyond your comfort level with the message, ask your team for assistance—your legal counsel and your investment bankers—to get involved in the background.

The buyer will likely want to follow your comments with comments of their own.

They may wish to see your comments in advance and may not share theirs in advance with you.

Just be aware.

The buyer may have others from their bank at the meeting too—likely some department heads, human resources, etc.—to help answer questions employees may have and to let them know they will be meeting with them as time progresses towards closing.

Prior to adjourning the meeting, hand out copies of the press release to all employees, and hand out a pre- prepared frequently asked questions list.

The frequently asked questions will be the same talking points from your announcement.

It will just be in another format which allows for people to process the information differently.

It will give the employees a resource to refer to as they begin to get questions from family and friends during the evening (and some customers too).

It will be an aid for them as they arrive the following morning when there is certain to be a great deal of conversation on the topic.

It is likely that while the employee meeting is taking place, a press release, issued by the buyer, has gone out.

While you may or may not get an opportunity to see the press release before it goes out, you should get a copy as it goes out from the buyer.

Following the “all-employee” meeting, if you have an advisory board, you may wish to strongly consider inviting them to attend a special meeting.

Your advisory board is likely to be your biggest and/or your most influential customers, and they really should be hearing this message from you personally rather than reading about it or hearing about it from a friend or another banker vying for their business.

In addition to hearing the news from you, they also have an opportunity to hear from the buyer as the word is hitting the street.

It provides an opportunity for immediate introductions to the buyer, which is beneficial to both the advisory board members and the buyer.

Provide a copy of the press release and the frequently asked questions to the advisory directors prior to their departure.

You will want to have crafted an email message to your shareholders prior to all the meetings, but that email won’t go out until the announcements have been made.

The message will be a shareholder-tailored message but should be very similar to the message provided to the employees and should include copies of the press release and the frequently asked questions.

You will want to let your shareholders know that they will be receiving more details in the coming weeks.

This is a message coming from you.

The buyer will want to see an advance copy, typically through sharing with your legal counsel who in turn shares it with the buyer’s legal counsel, who in turn shares it with the buyer. You will have to build some time into the process to accommodate this going forward.

The press, customers, or shareholders may try to reach you once the word gets out.

The announcement you prepared for the stakeholders that we have just gone through are your talking points.

Stay disciplined and stay on message.

You will have this feeling of a giant weight being lifted off your shoulders because others now know the Big Secret.

You’re going to be hit with the urge to relax.

Don’t.

You have come too far, and this is too important to relax.

There will be time for relaxing later.

Action plan:

• Imagine this day in your mind’s eye. Walk through the whole day. Think about each meeting and the message you will provide. You will be amazed at what this does to unlock your mind. Think about how each group may react and the questions they will have.

There are zero hacks or tricks in this newsletter. Just proven tactics that help you choose the right path for your bank.

Your path will:

• Inform your strategic plan.
• Guide your annual business plan and budget.
• Clarify priorities.
• Define your message so it can be communicated with confidence.

This is how savvy bankers navigate.

They build smart and valuable banks and choose the best time to sell – serving the needs of the shareholders and the board.

I hope you found this short lesson helpful.

What are your thoughts?

I’ll see you next week.