An appetite for growth

YOU MIGHT CALL Lloyd DeVaux the wizard of bank acquisitions. In 1998 alone, DeVaux, executive vice president and CIO at Union Planters, oversaw the technical side of 18 different bank acquisitions. In 1999, there were five more acquisitions. In fact, DeVaux has been involved in more than 50 bank acquisitions since he joined the $33 billion Memphis, Tenn.-based bank holding company in 1994. It's enough to make anyone's head spin.

But here's the kicker: These acquisitions didn't happen one at a time, in orderly fashion. Between 1989 and 1999, one of the growth strategies Union Planters pursued was continuous acquisition -- that is, it was in the process of acquiring various smaller banks all the time. Many acquisitions were underway at once, as were multiple systems conversions. And the banks being acquired were scattered across the country. The result? Lloyd DeVaux was one very, very busy man.

Continuous acquisition is a strategy that many companies -- particularly in the banking industry -- have chosen to pursue as a means of growth. "It's a lot easier to grow by acquisition than it is to grow organically by building new banks and trying to win new depositors," says Mark Feldman, partner and managing director of the global M&A consulting division of PricewaterhouseCoopers in San Francisco. But a continuous acquisition strategy is much less certain of success today than it was a few years ago, because the pace of acquisitions has driven up prices for smaller institutions, says Feldman, who is also coauthor of Five Frogs on a Log: A CEO's Field Guide to Accelerating the Transition in Mergers, Acquisitions, and Gut Wrenching Change (HarperCollins Publishers, 1999).

Indeed, Union Planters itself has not made any new acquisitions recently (DeVaux declines to speculate about the company's future plans), and it's not yet clear whether the strategy has paid off for the bank. The 18 acquisitions in 1998 alone increased UP's assets by 78 percent, from $18 billion to $32 billion. But in his letter to shareholders in the company's 1998 annual report, Chairman and CEO Benjamin W. Rawlins noted the company had achieved only half the $100 million savings in operating costs it had projected from those acquisitions. That's largely because in many cases UP had to keep redundant staffs in place for longer than it had anticipated. Expenses during the acquisition period were also higher than anticipated, Rawlins noted, though the company expected to recoup the projected savings in 1999. As a result, profitability did not grow as quickly as expected.

Yet even with the chaos that just a single acquisition can cause, UP has managed to preserve the good graces of its customers. Customer retention has been better than average for a company in the middle of continuous acquisition, says DeVaux.

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