a questionable life

by Luke Lively

  “How so?” I asked.

  “The CEO of Merchants has asked to speak at our next board meeting. Ron and several of the board members have asked me to agree to it.”

  “Andrew Ledger,” I said.

  “I’m sure you’ve met him,” Benny said.

  “Only once, but I’ll never forget.”

  The memory of my first and only meeting with Andrew Ledger remained clear. Two turbulent weeks had passed since the announcement PT&G was being sold to Merchants. I had received a memo from Chad that our executive team would be flying to Charlotte to meet the Merchants Bank executive team.

  We were shuttled from the airport to the bank’s forty-four-floor headquarters in the heart of Charlotte. The football stadium figured prominently in the downtown area, with the Merchants building almost shadowing it.

  When I saw the building, I remembered something John Helms had told me about their home office. When Merchants Bank was planning on constructing their new tower in Charlotte, one of the most famous architects in the country was brought in to design a building that would stand out from all the others.

  We were ushered up to the thirty-fifth floor into a large meeting room. Ledger, a tall, scholarly gentleman whom I had seen numerous times in banking newspapers and magazines, asked us to take a seat after shaking each of our hands.

  “Good afternoon! It’s my privilege to give you a brief overview of your new employer, Merchants Bank,” Mr. Ledger beamed and began his PowerPoint presentation. What followed was two-hours of oratory showing the growth of Merchants Bank during his tenure. The growth was impressive, but two items stuck out.

  Large layoffs followed every merger. And with each merger came a “state president.” This job was the top leadership position in each state Merchants operated. All of the state presidents had started at Merchants in North Carolina. It made me wonder what would happen to Chad and, of course, me. That should be my job, I thought as Ledger continued to talk about the history of the bank.

  “After sixty-five mergers in twenty-five years, we know what makes a merger work,” he said with a huge smile. “We need to take care of each of you. You’re the most important people to us in the purchase, I mean merger.”

  He began to describe what taking care of us meant. “You’ll each be paid a bonus of $250,000 to stay on board with us for two years following the purchase. In addition, you’ll each receive a pay increase of 15 percent immediately, and you’ll be part of our generous stock option plan.

  “What happens after two years?” one of our executive team members asked.

  Andrew casually smiled and stated in an almost matter-of-fact tone, “After two years, to be honest, you’ll probably take your bonus and leave. Since we have been making this offer an option, no one has stayed past two years.”

  At that point, I knew exactly what we were dealing with. We had truly in every sense of the word been sold—not merged. I never saw a “compassionate purchaser” as Chad termed Merchants; just a purchaser. It would be their way or the highway.

  Sadly, I had been right. Now, I had a chance to prevent Merchants from destroying another bank.

  “Are you going to allow him to speak?” I asked Benny.

  “Part of our job is to represent shareholders. It is our fiduciary duty to listen. We may have only one opportunity to present a case for staying independent,” Benny said. “Everything will likely be settled in a two-hour meeting.”

  “If Andrew Ledger is talking, it will be a four-hour meeting,” I said. “He’ll probably have a slide show.”

  “I’ve done some research on Merchants,” Benny said. “I need your help to do some more.”

  “Benny, I’ll do whatever it takes,” I said.

  “Just like in everything else we’ve done, we will do our best and let fate work,” Benny said. “Cause and effect.”

  I began researching each of the Merchants’ purchases dating back over the past five years. The bank was consistent in its postacquisition tactics. After acquiring a bank, they would gut it of its operations and bring in several of their people for leadership roles, including the state president. They would then begin to downsize the bank’s staff while changing all of the products and services.

  I calculated that on average after each purchase they lost 15 percent of their customers. Comparing profitability before and after was lost in the murkiness of their accounting. What I could find was a shrinking market share, a loss of employees, and lower profits.

  Merchants had covered their losses by continuing to buy. John Helms had likened the bank to being on a perpetual treadmill of buying. “They can’t stop buying. Once they stop, the lower profits will show. The more they buy, the faster the treadmill speeds up. At some point they won’t be able to keep up the pace. But they only know one speed—faster—a crash just waiting to happen.”

  I had lived my life with a similar philosophy and pace. I crashed. I knew they would. I shared this view along with my findings with Benny.

  “That is an interesting analogy,” Benny said. “How did their shareholders fare after each of these banks sold?”

  “They received an immediate premium, but it was quickly lost. Most of the banks that sold to Merchants had problems in earnings, growth, or increasing shareholder value. None of those problems exist here or at my ex-employer, PT&G.”

  “Why did PT&G sell?” Benny asked.

  “Executive greed,” I said.

  “That is what we are battling, Jack—greed,” Benny said.

  At least it was an enemy I knew and understood.

  There’s only one vice that smothers integrity—hypocrisy.

  —BENJAMIN FRANKLIN PRICE

  40. What Do We Want to Be Remembered For?

  “WHAT DO WE WANT TO BE REMEMBERED FOR?” Benny asked the board members, taking time to make eye contact with each person in the room, including Andrew Ledger. The question wasn’t open ended. The directors sitting in the room were in the process of making a choice that would affect more than me and the hundreds of employees of the bank and the thousands of clients.

  Their decision would change their world.

  The Citizens Bank board meetings were held in one of the oldest buildings in Salem, Virginia, above a restaurant called The Dixie Tavern. While it had been expanded over the years, the original two-story stone building had remained remarkably intact.

  I always thought it was odd that the bank held its board of directors meeting on the second floor of a restaurant. Wood paneling covered the walls, probably a remodeling attempt made in the 1970s. The carpet was now a faded gold with well-worn tracks and stains reflecting the age and traffic in the large room. In the middle of the room were four foldable metal tables placed tightly together and covered with thin white tablecloths. Citizens Bank had ample options for meeting space, but the directors chose to continue to meet where they had formed the bank. It was an unspoken homage to what they viewed as a good luck charm, a way to stay in touch with the bank’s roots. Or maybe, as Benny was fond of saying, it was because they loved the food.

  The restaurant had served as the first site where Benny, Ron Landreau, Sherry Carter (the owner of The Dixie Tavern), and a few other investors met to discuss starting a new bank twenty years earlier. All of the people involved in those initial meetings had been associated with Valley Bank & Trust. Benny was the president and Ron and Sherry were directors. Valley was one of the oldest banks in Virginia and had close ties to the community, supporting many arts and nonprofit organizations. Possessing a good portion of the Roanoke Valley’s banking business, it became a target for larger banks in the late 1970s. The bank’s directors had finally decided to sell it to the largest bank in Virginia. After it had been sold, the hometown atmosphere was lost, according to Sherry Carter. Sherry had become one of my closest friends since moving to Virginia, taking care of “keeping Jack fed” as she liked to remind me.

  “The big bank ruined what was special about our little bank—it took away its heart,” she had to
ld me. “We sold the bank because we thought we were doing the right thing for everyone, primarily the shareholders. The new owners promised they would keep everything pretty much as it was, but they lied. People got laid off. They stopped donating to the community. I was afraid to go out in public for months. Every time I went out someone would start fussing at me about us selling the bank. Looking back I know what happened. We got greedy and hoped things would work out. I think deep down we knew they wouldn’t.”

  “What do you think about Merchants?” I had asked.

  “Merchants Bank sounds a lot like the bank that bought Valley Bank but much bigger. But they’re supposed to be different than most. I’m going to wait and make up my mind after I hear this Mr. Ledger talk. I don’t want to make the same mistake again. But I do have to look out for my grandchildren. I’m not getting any younger.”

  I looked around the room filled with directors talking quietly in small groups. In a few moments, Andrew Ledger, chairman and CEO of one of the largest banks in the country, would visit The Dixie Tavern and speak to the group trying to convince them to sell. I had as much at stake as anyone in the room. My career was hanging in the balance.

  Benny and I had put together a brief but clear presentation to refute the value offered by Merchants Bank. History did not lie. Merchants were scavengers. Typically they bought weaker banks that had little potential. But this was different. Citizens was an extremely profitable and growing organization. As a result Merchants had been forced to offer a huge premium, but the premium would be worth little unless Merchants improved all of Citizens operations, which was unlikely. That was our area of focus. How could Citizens be better off for selling? I felt great about the information. But as Benny said while we were driving to the tavern, “You never know what will happen when a lot of money is involved. Anytime you’re dealing with greed, rationality can make a quick exit,” he said.

  “I’m sure you’ll block the exit today,” I said, trying to show as much confidence as possible.

  “I’ll do my best,” he said, “but money talks much louder than I can.”

  As a ritual before the board meetings Sherry served a Southern feast of biscuits with gravy, sausage, bacon, and grits. Standing beside Benny and speaking to each board member as they entered, I could sense the tension.

  Ron Landreau had been politicking the idea of selling and had visited most of the directors and large shareholders at their homes in an attempt to convince them to vote to sell to Merchants. Ron, a local politician who had held several publicly elected county positions, was using packaged information prepared by Merchants to show the value of joining a larger bank.

  With almost all of the board members in the cramped upstairs meeting room, Ron Landreau entered with Andrew Ledger. While Ledger appeared more scholarly than political, he knew how to work the room. He shook hands with every director and took his time making his way around the room, leaving Benny and me for last. Finally Ledger stepped toward Benny.

  “Benny, good to see you again,” Ledger said. “I hope you’re doing well.”

  “Thank you, Andrew, and I hope you’re doing well,” Benny said.

  “Well, you can make my day a lot better by agreeing to sell to us,” Ledger said.

  “Andrew, I can’t say it’s good to see you here,” Benny said calmly. “I’m going to do my best to keep Citizens Bank independent.”

  I was surprised. I hadn’t expected Benny to challenge Ledger so strongly this early.

  “Well, I understand,” Andrew said. “If I was in your shoes I would feel the same way.”

  “You’ll be in my shoes someday, and you’ll know how I feel,” Benny said. “Bank on it!”

  I was ready to hit the floor. I held back a belly laugh. Benny was pulling out all the stops.

  Benny started the meeting. “Our board meetings are held under Robert’s Rules of Order, and I am the chairman. You have been given forty-five minutes to make your presentation. I’ll have the opportunity to speak after you. Understood?”

  “That is hardly fair,” he said. “I have a computer presentation that will take at least two hours.”

  “You’re being treated more than fairly,” Benny said. “No one can listen for more than an hour to even the best of speakers without getting a numb rear end. I would urge you to use your forty-five minutes wisely. I control the clock. Understood?”

  “Benny, I don’t appreciate being treated like this. When we buy your bank, I’ll have the watch,” Andrew said, almost spitting out the words.

  “You may buy Citizens Bank, but you’re not buying me,” Benny said.

  After that tense exchange, Benny asked Ron Landreau to introduce “his special guest.”

  Weighing in at over three hundred pounds and standing less than six feet tall, Ron Landreau appeared to be a shorter, younger version of Andy Griffith’s Matlock character. Dressed in a beige three-piece suit that must have been ordered from somewhere in South America, Ron began his introduction.

  “Greetings lady and gentlemen,” he began, “it is my distinguished pleasure to introduce one of the top bankers in the world. He is a man who has engineered almost seventy mergers and has grown his bank into one of the largest banks in the good ole US of A. He is a man who knows how to turn losing banks into winners and winners into champions. It is my honor and privilege to welcome him to our Citizens Bank directors’ meeting. Please join with me in welcoming the chairman, president, and chief executive officer of Merchants Bank, Mr. Andrew Conner Ledger.”

  The board politely applauded as Ledger walked to the front of the room, the old boards in the floor cracking and popping. Ledger stood to the left of Benny, who was seated at the head of the board table.

  “Thank you for allowing me to visit today,” Andrew began. “I’ll not be able to give you all of the material I hoped to give you because of the time limitation. But I think in my brief time with you I will convey the value Merchants Bank can offer you as shareholders of Citizens Bank.”

  For forty-five minutes an agitated and obviously frustrated Andrew Ledger fought with himself to shorten his usual two-hour slide presentation. As he raced through the one hundred twenty-six slides he realized he was only one-third of the way through his presentation with less than fifteen minutes remaining in his allotted time. Benny knew what he was doing when he cut Ledger’s time. Ledger’s presentation was at its weakest when it came to shareholder value. Other than showing that the stock was traded on the New York Stock Exchange, every chart depicted a stock that languished in the same trading range for years. There appeared to be very little upside to Merchants stock after getting an initial premium. The facts he hoped would be forgotten in a much longer presentation were now left visible. The deal was only good if Merchants stock could climb higher after the purchase. You could see the sweat starting to drip off his temples as he tried to gain control of his thoughts.

  “Sometimes these slides aren’t as pretty as they really should be,” he said. “You know how accountants are.”

  Benny spoke up and said, “You have five minutes left.” This only made Ledger angrier, raising the tension in the room as his voice rose in volume.

  “I don’t believe I have been given the adequate amount of time to show all of the information that would portray the value of joining Merchants Bank,” he said looking at Benny. “If you allow me, I would appreciate having at least another half hour. I would like to go back and review some slides I had to skip.”

  Benny knew his audience. While greed had been at play, Ledger’s angry tone and failure to show any real value left the majority of the board with doubts. Surprisingly, Benny called for a vote.

  “Even though Mr. Ledger gave us the same information for our review over two weeks ago, to be fair to our guest, I will call for a vote on his request for more time by raise of hands. All those in favor of allowing Mr. Ledger another thirty minutes to explain why it is a good idea for Merchants to buy Citizens Bank, please raise your right hand.”

&nb
sp; Only three of the fifteen members raised their hands.

  “All opposed, please signify by raising your right hand,” Benny said.

  The rest of the board members raised their hands.

  “Mr. Ledger, as a result of the board vote, your time is now down to three minutes,” he said looking at his watch.

  “I have an incredible offer for you; I am willing to sweeten that offer right now, if you give me thirty more minutes,” Ledger said. “I will increase the stock premium we have offered to you by 15 percent.” Everyone sat stunned for a moment. Ron Landreau raised himself from his snug-fitting chair and asked for permission to speak. Benny granted him the floor.

  “I believe we owe more to Mr. Ledger than a paltry forty-five minutes. He has come all the way from Charlotte, North Carolina. He has taken time to prepare a beautiful package of information. It even has pictures.” Most of the board members laughed aloud, but Ron continued. “Mr. Chairman, with a different offer now on the table I make a motion that we allow Mr. Ledger the opportunity to speak for another thirty minutes.” Mitch Gannon, one of Ron’s allies, seconded the motion.

  Ledger, now feeling in control, put his remote control down and began to speak off the cuff. “I say this not to dishonor your fine chairman, but I have seen this many times. You all have played a part of building a great organization. But time takes its toll. You are at your peak. I am offering a deal that will be unmatched. Every stock analyst will say that I’m foolish for making an offer like this for a little bank in Virginia. But I’m not. While each of you stands to make a lot of money from this offer, I speak not just to you but also to your children and their children and their children. What you’ll make from this transaction will help your family for generations. It’ll keep your bank operating as you see it operating now.” Hearing those words Benny looked over toward me and allowed a slight grin. “I appeal to you to consider my offer. It is the best thing for you, your family, and your community.”