Gary M. Crosby first met Beth E. Mooney at a CEOs conference in Manhattan a couple of years ago, when M&T Bank Corp.’s Robert G. Wilmers introduced them to each other.
Crosby, CEO of First Niagara Financial Group, and Mooney, KeyCorp’s CEO, have gotten to know each other much better in the past few months, since Key announced plans to acquire First Niagara for $4.1 billion.
As the two banks aim to close the deal in the third quarter, Crosby spoke about running a bank that is on its way to being acquired, and his hopes for First Niagara employees:
Q: How have things progressed since the deal was announced in October?
A: We’re still an independent company. We’ve got a business to run. And we still compete head to head with KeyBank for business, as we always have done. From that standpoint, it’s business as usual. Now what we are doing with KeyBank is planning for the day (the merger is done). That we can do without tripping any regulatory switches. … It’s been going very, very well. I’m really pleased with the way the KeyBank and First Niagara teams are coming together to plan the merger, to make sure it’s as seamless as possible for our customers and for our teammates.
Q: How are the two banks carrying out the planning?
A: KeyBank, for example, has actually taken people out of their normal business-as-usual role and put them full time into these transitional roles. We have done the same in some cases. In other cases, we have people doing both. There’s an overall transition leadership team, comprised of some KeyBank people and some First Niagara people. They report up to Chris Gorman at KeyBank, and then Chris for transitional purposes reports to Beth Mooney and myself.
Underneath that transitional leadership team, there are various lines of business teams, and also support function teams, like human resources, legal, etc., comprised both of KeyBank and First Niagara people.
Q: Do you and Beth Mooney talk often?
A: We’ve talked regularly. Beth has been here. As a matter of fact, I gave her a tour of Larkinville to get her excited about the possibilities here in Larkinville and to appreciate what a special place it really is. I know she enjoyed it very much. They do have to make decisions on facilities, of course. And they need more space, clearly, in Western New York. I wanted to make sure she personally got a chance to see Larkinville.
Q: As a CEO, how do you balance running First Niagara as an independent company with working toward a merger?
A: By revisiting priorities. I did that with my team and (Key) did that with their teams. I made it very clear what our top priorities are. And they are people, people, people. Our next priority is running the business as an independent company. Our fifth top priority is the transition, conversion, integration.
Initially, there was some reaction like, ‘Well, we’ve got to make sure this transition goes well, shouldn’t that be our top priority?’ That can’t go well, nor can running the business as an independent company, if we aren’t focused first and foremost on people, people, people. … Keeping our people focused ensures that we’ll run the business successfully and we will have a transition that’s successful as well.
On the people front, we have very robust communications in place. Beth and I pledged at each town hall meeting and since then in communications that the teams will know what we know as soon as possible after we know it.
We put retention incentives in place for a number of people. You have to be realistic with these retention incentives. If somebody’s going to be offered a great career opportunity, it’s highly likely they’re going to take it, notwithstanding they have to give up the retention incentive, because how do you say no to a great career opportunity?
All you can hope with retention incentives, in my view, is that you cause them to think twice before they jump ship, for an offer that’s less than they really had hoped for, for an opportunity that is less than they really hoped but took it anyway for the sake of job security. We wanted people to feel like you’ve got more time to find something if you don’t end up with Key, and try to reduce the anxiety level. It doesn’t take it away, by any means.
Q: Do you expect to see more employees leave once they receive their bonuses?
A: Every year, that’s a milestone, even without a merger. That is the next big milestone. We’ve had a couple cases here where a competitor – we have really good talent, they wanted some people badly, and they bought out the retention (incentive), and they paid the bonus that the person expected to get this year, which they’re not going to get, because they’re going to leave before they’re actually paid.
If the competition wants somebody bad enough, they’re going to throw everything they can. And you know what, it’s OK. One of my measures of my success here is that as many people as possible end up in a good place, whether it’s KeyBank or somewhere else. I’m not sweating the prospect of people leaving, because to me, they’re leaving to go somewhere where they’ll continue to have a job.
Q: This is ultimately Key’s decision, but what can you do to protect as many jobs as possible in Buffalo?
A: I can tell you that I’ve had a lot of discussions with Beth and I’ve met with (people who report directly to her), talking not only about the lines of businesses but our people here. I continue to be a shameless promoter of the great talent we have here. I can tell you from the planning and collaboration that’s been going on, Key recognizes that.
To their credit, they’ve been quick to announce keeping the indirect auto business, keeping the insurance business, keeping the leadership in place, keeping the teams in place. Likewise the mortgage operations. They’re being very thoughtful about this and moving as quickly as possible. And really just as important, they’re being very open minded and receptive to what we have to say about what we’re most proud of.
Q: Was it hard to go along with the decision to sell the bank instead of staying independent?
A: The answer is, absolutely, it was very hard. I describe it as gut wrenching. But I can’t afford to make decisions with emotion, nor can the board. And it was gut wrenching for the board, as well, I will tell you, even though I’m the only Western New Yorker on the board. … It was hard, but the evidence that this was the right thing to do was very, very compelling. … It became very clear to me as CEO, I’m out and about in the early summer visiting all of our major institutional shareholders. And it was very clear from that road trip what our major shareholders’ expectations were in order for us to be able to justify our independence.
Q: There was some negative reaction to the large payouts top executives at First Niagara are due to receive. How do you respond?
A: It’s important for people to know that these so-called changes in control or golden parachutes are put in place for the protection of shareholders and the company in times like this where there’s a merger, to provide assurance that the executives are going to remain in place through the transition period in order to ensure that there will be a successful merger. That is clearly in the best interest of both companies, both shareholders. … I get nevertheless, to the vast majority of people that it’s a large sum of money, and it is. … My preference would have been to work for another three years with my team to turn around First Niagara. … I would have been able to leave proud that the team turned it around.
Q: Will branch divestitures be part of the merger?
A: Absolutely. But they’ll be sold to competitors, and the jobs in those branches I fully expect would be retained, because these are new branches to the competitors and new geographies for them. … I’m not worried about that at all.
The job losses (stemming from a merger), whatever number there is, that’s not a basis for regulators to object to a deal. That being said, I can assure you that KeyBank is very, very sensitive to upstate New York and Western New York in particular in terms of jobs impact and they’re being very, very thoughtful about how to go about minimizing that.
Q: When you think about all that First Niagara has built up here, how important is it to you to see as much of that maintained as possible?
A: With me, being Buffalo born and raised, it’s incredibly important to me. And that’s why it was a gut-wrenching decision to think that First Niagara as we know it will not be around.
Short term, there’s going to be some pain in the form of job losses. But longer term, (Key is) going to be able to step and in do things that First Niagara as it stands would be unable to do, until we were able to get our house completely in order. As difficult as it is, I think about it longer term, and it is the right thing to do for the community and the team at large here at First Niagara.
From a competitive standpoint, they’re going to give M&T, for example, a real run for their money now, where we were always punching above our weight class to compete with M&T. … There’s going to be real competition now going forward, serious competition. And that’s good for consumers, businesses and the community, because they’ll compete head to head for community recognition as well. Those are the things I think about that make me feel better about what this means in the longer term for Western and upstate New York.