A Merger of Equals, for $28 Billion

In a rare move, SunTrust and BB&T plan to have each CEO run the combined massive bank for different periods. Will it work?

The dollar value alone on the merger between regional banks BB&T and SunTrust certainly made the deal worth paying attention to. At $28.2 billion, it’s the largest U.S. bank deal since the financial crisis and one of the biggest financial industry deals ever. 

But perhaps more eye catching for executives outside the banking business is how the combined bank will be run. Kelly King, the chairman and CEO of BB&T, will serve as CEO of the combined company until March 2022. Then he’ll turn over the reins to current SunTrust chairman and CEO William Rogers, who until then will serve under King as president and chief operating officer. The bank’s executive management team, as well as the board of directors, will be equally split between representatives of both SunTrust and BB&T. 

Such so-called “merger of equals” are rare indeed and can full of risks. Some high-profile examples of these types of deals include the ill-fated Daimler/Chrysler and AOL/Time Warner mergers. But experts say the banks deserve some credit here—making an effort to establish equality before the deal is even announced is a good first step. “When mergers fail, it’s because they can’t optimize the full strength of both organizations in the near term,” says Tierney Remick, a vice chairman and co-leader of Korn Ferry’s Board and CEO Services practice. 

Experts say that, during large mergers, the focus of the top leadership has to be on creating the most seamless integration possible. If that’s not done effectively, then the organization can risk alienating key employees. Those disenfranchised executives “will seek an environment where they are respected” and depart the bank, Remick says. Judging from the managerial announcements, the banks are signaling that they have thought through this problem, she says

There are no guarantees with any merger-related succession planning, of course. The executives may decide in a year or two that they don’t like the bank’s direction and quit. Health or other personal reasons could also play a factor in executives leaving.

The banks, both based in the southeastern United States, are pretty similar. They’re both commercial banks based with large consumer banking franchises. That similarity also improves the merger’s chance at success, says Eric Pikus, head of North America financial services with Korn Ferry.  “It’s not like you’re taking a bank with an investing-banking culture and merging it with a commercial bank,” Pikus says. While executives should never underestimate the impact of cultural differences, Pikus doesn’t anticipate any cultural mismatch. “These are two banks that are very comparable in the businesses that they are in and how they go about doing it.’’