Will 2019 be remembered as the year that big bank merger and acquisition (M&A) deals become popular again?
As CNN Business reported in early 2019, the merger of BB&T and SunTrust resulted in the creation of the sixth-largest U.S. bank and upped the ante for other heavy hitters.
But as we turn to the future, M&A’s may have a new focus: community and regional banks.
This, of course, is not a new conversation. This Business Insider article from August of 2019 reported that many community banks were already in various stages of consolidation. What’s more, an annual survey conducted by the Federal Reserve, FDIC, and the Conference of State Bank Supervisors reported that 14 percent of community banks received an acquisition offer (up from 11 percent in 2017) in 2018 and 25 percent made an offer (up from 20 percent in 2017).
As this suggests, 2020 may be huge year for community and regional banks. Because when handled properly, mergers create opportunity for bank marketers. A survey from 2016 found that, on average, the overall value of both the acquiring and acquired companies increased. And digital marketing can help secure a seamless transition. Let’s review.
Financial marketing helps settle the waters during a merger.
For internal teams, acquiring a company sometimes means accessing new resources. As we’ve written about before, M&As can help banks scale quickly by providing access to increased capital, which can influence lending and investment efforts. It’s also very possible that you may lose employees and accounts. While there may not always be a true transfer of talent, it’s a perfect time to reassess your goals and realign your department to anticipate change.
However, by focusing on retaining talent, you can smooth a deal during a potentially perilous time. Bolstering your internal marketing and communication efforts can help make your team stronger and prove immediate value during a sea change. And rallying your internal team around a central cause helps ensure that you deliver optimal customer service during a merger.
M&A opportunities are no doubt a risk, but they also create huge opportunities. Thinking of a merger in this lens can help evaluate your goals. Who is getting what from the deal? What processes will change? Marketing can help communicate change internally—and help build internal loyalty across departments to drive end results during this transitional period.
Why customer loyalty matters in merger and acquisition strategies.
Regional banks benefit from hyper-local customers. When banks are decentralized, there is a perceived risk that many customers may jump ship. However, while bank mergers can certainly client attrition, the rates may be lower than you think. Consumers simply don’t want to switch banks if they don’t have to.
According to a 2019 U.S. Retail Banking Satisfaction Study, only 4 percent of consumers switched primary banks in 2018 (down from 8 percent in 2016). While American Banker claims that this low customer retention rate is facilitated by convenience offered by banks, this article claims that there’s more at play. Instead, it argues that consumers aren’t closing accounts, they’re just adding new ones. Technology has certainly made banking easier, but easy money movement has eliminated the need for consumers to close accounts.
To increase deposits—and leverage the potential of an M&A—it’s mission critical to keep customers engaged.
Financial marketing helps improve customer engagement.
Customer engagement must be central to your 2020 marketing strategy. In fact, Gallup research shows that engaged customers result in 37 percent additional revenue (including more than double the amount of investment, insurance, and advisory product purchases). Banks should remain as transparent as possible before, during, and after a merger. When possible, it’s imperative to communicate news of a M&A early on in the process. Establishing consistent, clear communication helps retain wary customers and strengthens existing relationships.
Paid advertising helps banks control the messaging during a merger.
For starters, it enables banks influence messaging in ways that other channels cannot. Paid ads help banks control the message across all touchpoints, channels, and product lines—which is imperative in times of a massive overhaul. They help customers avoid any confusion, including name changes or branch updates. It helps avoid any potential negative connections to either an old or new brand. And it ensures that the messaging centers on helpful, not harmful, language.
Whether you’re merging with a regional bank, or being acquired by a bigger company, 2020 may be a year of change for your financial organization. Digital marketing can help you manage expectations and deliver targeted messaging to keep customers informed of any imminent change.