Making Money Personal: BMO Focuses on Customer Relationships
by Rita E. Garwood September/October 2016
In four short years, BMO Financial Group has risen up the ranks of the equipment finance industry. While a large part of this ascent is due to the bank’s strategic acquisitions, there is more to the story. Jud Snyder and Dan Clark, leaders of BMO’s Equipment Finance and Transportation Finance businesses, respectively, also attribute this success to the company’s culture, which puts the customer first.
Prior to 2011, BMO was not a significant participant in the equipment finance industry, but by the end of 2015, the bank had risen to No. 15 in the Monitor 100 ranking. A large part of this sudden rise can be traced back to the bank’s desire to enter the space, which was achieved through strategic acquisitions.
BMO’s first move into equipment finance came with its acquisition of Marshall & Ilsley (M&I) Bank in 2011. This step brought Jud Snyder, president of M&I Equipment Finance, into the BMO family.
“The beautiful thing is that BMO really came in from the start, knew it was a business they liked and they knew, if done right, the equipment finance industry had low loss given default and was a great compliment to existing bank relationships,” Snyder says. “It was also a transactional product that we could use for new clients, so we built up that strategy pretty quickly.”
Initially, Snyder and his team focused on three main areas: mid-market to mid-corporate clients in BMO’s core bank channels, building verticals in the large corporate client space (primarily along large-ticket transportation asset classes with a focus on marine, rail and corporate air) and building a wholesale business.
“One of the benefits that BMO brought to the table was that they were in a great position coming out of the recession,” Snyder says. “It was very well capitalized and was growth oriented in the space, so with that strategy and that strength behind us we grew quickly organically to just over about $2 billion by 2014.”
At that point, BMO expanded the business to Canada. “That initiative is not truly reflected in the numbers that you’re seeing in the Monitor 100,” Snyder says. “But we think that Canada might be one of the bigger growth areas for us in our equipment finance practices in the years to come.”
GE Transportation Finance Acquisition
BMO still saw room to grow. “We felt we still had the opportunity to make a pretty big impact in the industry, so we started to take a look at acquisitions,” Snyder says. “When we evaluate potential acquisitions we look at culture, client focus and risk. We just couldn’t see the right fit for us until we started looking at some of the opportunities with General Electric in the spring of 2015.”
Snyder says BMO’s executive team felt an instant connection when they met GE’s Transportation Finance team. “Dan’s team really shared a lot of the qualities that we felt were important and helped us build our business, and they had done it over a really long track record, so we knew it would be a great fit for us.”
“When talking to Jud and Dave Casper, the conversation was always centered around the customer and what we could do to help the customer succeed,” says Dan Clark, former president and general manager of GE Capital Transportation Finance and current head of BMO Transportation Finance. “It was the same building block that my business had built on over the last 40 years. As we went into our next stage of leaving General Electric, it was reassuring to see that. If you’re not satisfying your customers and helping them grow, you’re going to be stymied in a quagmire.”
Effectuating a Seamless Transition
BMO finalized its acquisition of GE Capital Trans-portation Finance in December of 2015. But even with a great match, transitions are never easy. Fortunately, Clark already had experience leading two post-acquisition integrations during his career.
“The first thing you have to do is get your employees engaged,” Clark says. “They need to start thinking BMO and forgetting the past. They need to look forward and adapt to BMO culture, terminology and — unfortunately, in today’s world — acronyms. GE was big on acronyms and I think BMO might be running up against them for the win on that one,” he adds, with a laugh. “You’ve just got to get that culture moving.”
Clark says another essential step in the process is hiring an integration manager. “I really think that having one person involved with focusing on the details, heavily involved in the day to day and keeping the process moving in all areas is just really important because you’ve got to get in, and you’ve got to get moving as quickly as possible.”
“Dan’s humble about this, but it’s also about leadership,” Snyder says. “From the day we announced to the day we closed and beyond, one of the things I’ve seen Dan and his leadership team do is they make it personal.”
Snyder recalls attending a town hall meeting hosted by Clark with a hundred employees in the room and another few hundred on the phone. Clark told his employees how good the BMO acquisition was going to be and how confident he was in it. Snyder says Clark’s leadership made his employees confident in the opportunities BMO was providing. “Beyond simply a strategy, I think it was about a good leadership team that we knew we had coming in from GE’s transportation business,” Snyder says.
The short-term goal for the Transportation Finance unit is a seamless completion of the integration. From there, Clark has a rosy outlook for the future.
“GE was very good at some things, and BMO is very good at some things, so what we’re able to do is truly take the best of two good businesses. It allows us to be a great business,” Clark says. “The biggest thing that we can do long term is be much more to customers than just lending for their equipment needs. We can now offer a full line of banking products.”
Snyder says cross-selling is also important for the Equipment Finance business. “We try to sell the whole bank every day, so it’s not just about one relationship or one transaction. It’s really trying to help people understand that as one of the largest banks in North America, BMO has strong capabilities in just about every space that our clients need.”
Expansion is also on Snyder’s agenda. “We have a goal to continue to grow, especially on a North American basis. We’re one of the few banks that can really deliver on a North/South partnership for our clients. We really try to make it more than just a transaction, and I think that ties into BMO’s overall vision. We believe within financial services there is an opportunity to deliver more on the human side of banking, that money is personal. Even in a business context, if you’re delivering things with a focus on a human aspect, your clients are going to understand that, they’re going to feel that and they’re going to be more loyal to us. That’s a real focus for all of our businesses.”
Part of providing this personal touch includes having the ability to work across all asset classes for clients. According to Snyder, his business will finance just about every asset class other than commercial trucks and trailers.
“We do still finance a small portion of trucks, but we know that Dan and his team are really the experts in that area,” Snyder says. “Our bank has sector expertise in food and consumer, engineering and construction, energy and financial institutions, and we’ve got a great geographic cross section across the U.S., so that gives us the capability to work across virtually all asset classes for our clients.”
On the transportation side, Clark says his team focuses primarily on heavy-duty trucks and trailers, has a significant medium-duty segment and has been expanding its business in the refuse space.
“Our model is relationships and collateral expertise,” Clark says. “Our customer base is such that relationship means a lot, and that’s what we have. We have 120 sales people across the U.S. and almost 20 across Canada — that local presence gives us that ability to have that relationship and be able to be everything to the customer. Now we have the ability to bring ABL products, treasury, commercial real estate and all the banking products that we never had before. Now we can put a bow right on the package for our customers.”
When looking at the equipment finance industry as a whole, Snyder expects the current slow growth conditions to continue. “We haven’t seen core manufacturing come back in any material way for a number of years,” Snyder says. “We see maintenance and replacement CAPEX that are continuing to drive volume, but we’ve seen a real reluctance to invest, and we’d attribute that probably to some political uncertainty as well as some of the fluctuation in commodities and energy prices over the last 12 to 18 months.
“What we’re seeing is that things are a little bit softer, still not bad, but you still have 2% to 4% GDP growth, and this is about what you get,” Snyder continues. “You get a relatively soft capital expenditure marketplace right now. We don’t see that changing much for the rest of 2016 or early 2017. I think we’re going to continue to see this ‘write and replace’ sort of strategy.”
As for transportation finance, Clark expects the current softness to continue. “We’re coming off of a high market over 2014 and 2015,” Clark says. “The first half of 2016 was soft, and I expect that to be about the same for the next 12 months. What you’ve seen in the last three or four months is what you’re going to see probably through mid-year next year before it starts having improvement in the orders and deliveries.
“It’s not like it’s been in previous market downturns because this one’s not driven by recession or some other pre-buy,” Clark continues. “It’s a combination of a slow economic growth and some political uncertainty. People are taking money off the table and not doing the purchases that they normally do, so we’re just in that part of the cycle, which is not bad, it’s just one of those fair-to-good type ranges that we’ll have to work our way through.”
Despite the slow growth of both the equipment and transportation finance industries, Snyder and Clark see opportunities ahead.
“We’ll celebrate our 200th anniversary as a bank next year in 2017,” Snyder says. “What we’ve found is that when things do slow down a little bit, we tend to shine. Our clients know that we’ve been there with them for a long time, and they tend to come back to us because we’re a safe harbor and we’re one of the banks they know are going to be there.”
“From the highest levels of the business in Toronto, the idea of growing this segment of the bank is a focal point,” Clark says. “I see that as a newcomer coming in, and it hasn’t diminished at all over the last nine months.”
“We’re excited about the opportunity to continue to grow,” Snyder says. “We think the industry is a strong one. We think it’s the engine behind a lot of the growth in the U.S. when you support clients with the capital expenditures they need to run their business. We look forward to continuing to invest in that. Honestly, with the addition of Dan’s team, we feel like we’ve got a really bright spot for the future.”
Monitor recently caught up with Tom Slevin, founder and CEO, and Brian Dundon, SVP corporate development at First Financial Equipment Leasing ahead of their company’s acquisition of NorFund, an independent leasing company specializing in capital equipment, solar and alternative energy and vendor finance programs.