Streamlining Farm Credit Association Mergers

What you need to know:

• Farm credit association mergers can be stressful, but the process can be more efficient and effective with organization and good communication.
• Proper planning is key – plot out your merger vote roadmap from start to finish with milestones and deadlines, and work from there to determine must-haves to make the vote happen.
• Understanding your stockholders- different kinds of stockholders will require different voting materials based on their classification, being familiar with this will help make the logistics of the merger more manageable. 

American farmers, ranchers and agricultural cooperatives feed the world, and they need the funding to do that properly. Nearly 70 banks within Farm Credit System support and lend to agricultural cooperatives and farmers across the country.  Recently several associations have merged – the reasons to consolidate can include the ability to grow, expanding their current offerings, or planning for the future.

But farm credit association mergers can be stressful with stringent regulations and milestones that can’t be missed. Recently, SBS hosted a webinar featuring expert insights from Jessica Fyre, Chief Operating Officer and general counsel of AgCountry Farm Credit Services. She shared her advice on how to implement a low stress farm credit merger process.

Why are farm credit merger votes essential?

Member-owners have the right to participate in the governance of the association. That’s the unique part of being part of a cooperative. Most people are familiar with the annual election process, but other key areas of the farm credit association business require member approval, including mergers.

Farm credit mergers are vital because members must participate in their association’s critical decisions. Download the free eBook, “A Guide to Farm Credit Association Elections” outlining best practices and success stories from within the industry.

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What steps should happen to have an orderly process?

Advanced planning is key to streamlining the project management of a merger.  “Know what each step is and the time required to complete each step. Figure that out as soon as possible and give extra time if you can,” said Jessica.

• Start with big dates, such as when to submit your package to the Farm Credit Administration (FCA), then work backward on what you need to do to hit that deadline.
• Don’t forget the small details such as who needs to be involved with preparation, review and approvals so you can get all signoffs as quickly as possible.
• Once you craft the timeline, pull in all the stakeholders and ensure they understand the timeline, key dates. As soon as the timeline is known and realistic, all involved parties need to work within their roles to successfully complete the tasks leading up to the merger itself.
• Understand what information will be enough for the organization to make a business decision on whether or not you can move to the next step.

Standard pieces necessary for farm credit association merger elections

“A lot of pieces go into the mailings that go out for a merger,” said Jessica. “It will depend on what kind of stockholder you have and what each type of stockholder is going to get. For example, voting members, Class B or non-voting members.”

All stockholders, whether voting or not, have the right to receive certain information about the association and its business dealings. All stockholders receive notice of the stockholder meeting and a merger disclosure statement including regulatory requirements.

Only Class B voting stockholders will get ballots, and a merger differs from director elections. For a merger, the vote is held at the stockholder meeting and ballots are mailed in advance. Stockholders can cast in person or by proxy, so both the ballot and proxy form must be included with a return envelope. Within all merger mailing(s), a distinction must be made that the vote happens at the meeting versus a paper ballot and, in order for the ballot to be valid, it needs to include the proxy. There have to be two separate documents because there are regulations around not having signed ballots and the proxy must be signed, so make sure you’re educating members and providing clear instruction.

Key dates

Plot out your election roadmap from start to finish with milestones and deadlines and work from there to figure out when you plan to send material to the FCA, and when you’d like the effective date to be.

• Which quarter are you planning to have the merger finalized? FCA submission must be based on financials from the most recent quarter.
• When will you have board approval? A pre-clearance letter? Funding bank approval? Everything is needed for the disclosure statement sent to the FCA.
• Once the completed packet is provided to the FCA, they have 60 days to provide approval.
• Set your stockholder meeting date then set your record date. Mailings need to be based on when the stockholder meeting is held.

Organization and easing stress during a merger vote

“It’s important to have a good team and rely on the experts in the different areas,” said Jessica. SBS, for example, knows how many packets you need to print, when decisions need to be made by, etc.

“Know your objectives, needs and expectations. Good communication is critical,” she said. Look into the potential for utilizing project management software to help organize this important process.

How to ensure members vote during a merger process?

“Stockholder engagement is important. Mail out information, utilize electronic voting if you can, determine how you can regularly communicate with stockholders, and continue to remind people about the election period. Make sure your email addresses are up-to-date, and utilize email campaigns,” added Fyre. “Shareholder informational meetings are a good way to encourage shareholder engagement give people the opportunity to ask questions. Rely on your teams and your branches. You don’t want staff to encourage stockholders how they should vote, but remind them to vote!”

Mergers and the related voting process can be stressful and raise uncertainty. But it’s an exciting time to be part of an organization focused on the future and acting in the best interest of shareholders. Timelines and communications are vitally important. SBS offers a dedicated project manager and decades of experience ensuring a secure, efficient and official voting process.

The SBS team can help you manage the farm credit association merger process successful If your merger is approved, then the work begins on integrating two associations with all the accompanying opportunities and challenges.

Have questions about your farm credit merger process? Contact us any time, we’re here to help.