How to keep customers after a merger/acquisition.

AuthorTriplett, Ted
PositionCUSTOMER RELATIONSHIPS/RETENTION

MERGERS AND ACQUISITIONS ARE ON THE MINDS OF A LOT OF BANKS THESE DAYS. On paper, they offer an opportunity to generate large returns and greater shareholder value. In reality, numerous studies have found that more than half of all mergers fail to deliver the intended improvement in shareholder value.

Why? During an acquisition, many banks focus on integrating technology and business processes to ensure the combined financial institutions can operate efficiently as one bank. But they often fail to place enough emphasis on retaining newly acquired customers and building loyalty. As a result, customer defections contribute to high failure rates and can undermine the value a merger once promised.

J.D. Power and Associates says the likelihood for customers to switch banks increases by up to three times after their bank merges with, or is acquired by, another financial institution. That kind of post-merger attrition rate-20 to 30 percent or more--represents a major loss of potential value.

According to a study by the Deloitte Center for Banking Solutions, 36 percent of bank customers who switched after an acquisition did so for emotional reasons--underscoring the fact that there's an air of uncertainty whenever two financial institutions merge. Fear of the unknown, resistance to change and feeling undervalued are key emotional reasons why customers leave.

The cause of attrition

Lack of communication with customers about the merger is a root cause of customer attrition and a key reason mergers fail to meet shareholder expectations. J.D. Power and Associates says fewer than half of customers at banks that are being acquired report they received a sufficient amount of information from their financial institution about the merger.

That's not all. When a customer finds out about the merger from a source other than the financial institution, they're twice as likely to switch banks compared with customers who reported receiving merger or acquisition communications directly from their bank.

I'll say it again: The best way to retain customers during an acquisition is through frequent, consistent, personalized and relevant communications--a...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT