From the edidor
The National Credit Union Administration approved 200 mergers in 2016, compared to 238 in 2015 and 262 in 2014. Will a decreasing trend continue? Time will tell.
But even if credit union mergers are decreasing—after many years of steady increases—in conversations with our members, we frequently hear mergers listed as a top area of concern.
In this month’s cover story, we explore the hidden costs of mergers. While many credit unions consider mergers for the perceived benefits of greater economies of scale and better profitability, some merger expenses are not as obvious.
The largest direct costs in a merger are typically cancellation fees on data processing and other service contracts, says Stephen G. Morrissette, adjunct associate professor of strategic management with the University of Chicago’s Booth School of Business and lead faculty for CUES’ Mergers and Acquisitions Institute. The fee for early termination on a core processing contract could amount to $25,000 per month for up to 24 months!
Other big expenses include legal fees, rebranding related to a name change and severance payments. But some costs are less obvious. Read more in “No Surprises.”
Another hot topic for credit unions is leadership continuity. Baby boomers began turning 65 in 2011, and both the Social Security Administration and Pew Research Center estimate that 10,000 boomers will turn 65 every day until 2030. While many older boomers delayed retirement after the Great Recession, Bloomberg reports that the number of Americans aged 65 or older not in the labor force rose by 800,000 in the fourth quarter of 2016. Closer to home, we list news of credit union retirements in almost every issue of the CUES Advantage e-newsletter.
With so many bright minds leaving our industry, succession planning deserves your attention. Leaders who make succession planning a priority ensure their CUs will thrive and forge ahead even when top leadership changes, writes freelance author Pamela Mills-Senn.
If you need help identifying potential successors for CEO and other top roles, Deedee Myers, CEO of CUESolutions provider DDJ Myers Ltd., suggests exploring five categories of competencies for leaders.
There are many ways to prepare to embrace new changes, from stretch assignments to higher education (our own CEO Institute has readied many execs for the top job over the years). Another option is executive coaching. We interviewed three CU executive and coach pairs to learn more about the process—and rewards.
I am eager to hear your thoughts about these issues. What competencies does your credit union value in a future leader? What merger questions do you have? And if you’re planning to retire in 2017, how are you preparing yourself and your staff for the changes? Write me: email@example.com!