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BURLINGTON, Vt. -- Risk managers faced with mergers or spinoffs of their companies need to act quickly and decisively in addressing the risk management issues those transactions pose.

But, according to panelists discussing the impact of "merger mania" at the Vermont Captive Insurance Assn.'s annual meeting earlier this month in Burlington, Vt., they often must overcome considerable obstacles to address those issues effectively.

Discussing Bell Atlantic Corp.'s merger with NYNEX Corp., which began in April 1996 and was finally completed 16 months later in August 1997, Sheila Small, director of risk management and corporate insurance for Bell Atlantic in New York, outlined a merger and acquisition due diligence checklist for risk managers.

Such a checklist should include listing policies, gathering loss data, assembling payroll information, examining contracts and assessing outstanding liabilities. That said, "This whole merger wasn't done this way," Ms. Small said.

Among other things, she noted, that in a "merger of equals" like Bell Atlantic-NYNEX, often there is very little due diligence done because there tends to be a lot of "trust" between the two companies.

Just the same, bringing together the two large companies required merging two large insurance programs, Ms. Small noted.

"The most critical issue was the programs that were determined by the merger agreement. And those were the runoff policies," she said.

Claims reporting procedures were another sticky issue. "The claims reporting procedure was very difficult in the two companies," Ms. Small said. "We tried to get all the old claims out of the way before the merger happened. I can't say we were very successful."

In addition to the "hard issues," such as insurance program details, there also are numerous "soft" issues that need to be considered in a merger as well, such as philosophical differences between the merging organizations, power struggles, the new organizational structure, relationships, cultural differences between the two companies and differences in work operations, the Bell Atlantic risk manager said.

"Being a merger of equals, there was a tremendous amount of power struggle at least until they determined who the risk manager was going to be of the new organization," she said.

"Then you have the personnel issues," Ms. Small said. "People who don't want to work for you."

The effects of uncertainty, stress and distractions on workers during a merger are another hurdle to be cleared. "You lose half the productivity of your people during this period of time," Ms. Small said. "There's no way around it. It's just human nature."

However, it's important to fight through those obstacles if a merger is to be successful, said Susan J. Albrecht, senior vp at St. Paul Fire & Marine Insurance Co. in St. Paul, Minn. She described some of the issues raised by The St. Paul Cos. Inc.'s merger with USF&G Corp.

"Day one, the whining starts. And day one, we're all looking for why we shouldn't have done it, including management." Ms. Albrecht said. "You can't let the whiners win."

"Seventy percent of mergers and acquisitions never meet their (financial) goals," she said. "And the No. 1 reason is culture."

Because two cultures can't be merged, management must determine which culture the merged company will have and implement it, Ms. Albrecht said.

"This 'Let the best system win' is baloney," she said. "You're going to be doing that for 18 or 24 months. Pick one and go with it."

The longer mergers drag on before they're completed, the less likely they are to succeed, Ms. Albrecht said.

"The turtle is not going to win. You'd better become a hare. As fast as it is, do it faster," she said. "You've got to integrate quickly, deal with the issues and move on."

"Fast is better. You don't want to prolong this," agreed Mary C. Gardner, director of risk finance, insurance and claims at MediaOne Group Inc. in Englewood, Colo.

The experiences Ms. Gardner discussed were based on a different sort of experience, however: a corporate split of one company into two new entities.

In her company's case, that split took about four months, she said. "But what that meant was there was a whole lot of work that had to be done in a very short period of time."

"The very first thing you need to know is why did the split happen?" she said, adding that the stock market's reaction to the move will be significant in terms of its potential impact on the company's directors and officers insurance program.

Ms. Gardner advised risk managers involved in a corporate split to rank the various insurance and reinsurance issues they face in order of importance. "The D&O and fiduciary (liability) is probably your A-1 issue," she said.

And in identifying the new entities' risks and exposures, "Don't presume everything stays the same," Ms. Gardner cautioned.

It's also important to anticipate potential issues that emerge after the deal closes, Ms. Gardner said. "Make sure that you've got a method and a means to negotiate through these," she said.

In terms of what might happen to a captive after such a split, Ms. Gardner noted that a risk manager may be dealing with a new group of people who don't understand what the captive was all about. "But use it as an opportunity," she said, suggesting that such a situation can be a chance to revitalize the captive and push new ways of using it.