More M&A on the Horizon?
Here’s How to Moderate Potential Damage

Thanks to prospects for a more favorable economic and regulatory environment, M&A activity in the banking space is perking up. For prospective buyers, getting the integration right will have material impact on the top line–because getting it wrong risks significant runoff from attriting customers and balances. 

Curinos experience and analysis show how high the stakes can be. Three months after Legal Day 1 of a bank transaction, balance attrition for the top (worst performing) quartile is more than three-and-a-half times greater than that of the bottom (best performing) quartile (see chart). On a deposit book of $10 billion, that can translate to more than $1.2 billion in lost balances. 

How can that loss be mitigated? The key is to understand and address the principal reasons customers attrite: 

• Poor customer communication. The degree of confusion and anxiety that a merger or acquisition typically evokes can’t be overstated. 
• Lack of staff buy-in and turnover. Being too aggressive in consolidation risks losing more than just good customers. 
• Changes to products, fees or other major items. Certain customer cohorts can be jolted by what they’ve become accustomed to. 
• Branch consolidation. There’s a limit to how far many customers will go in changing their branch. 
• Aggressive competitive offers. Competitors are definitely paying attention and often strike during this period of potential vulnerability. 
• Anti-big business sentiment. A sizable portion of customers not only think they’ll miss a loss of personal touch but also have disdain for large-corporate intrusion.  

While any transaction will have its share of lost customers and balances, thoughtful pre-integration planning and execution can help minimize the impact. The right playbook addressing the most sensitive drivers of attrition is essential. And acquiring FIs need to be sure to continue to market through the transition to drive acquisition. This is no time to take the foot off the accelerator.