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- SunTrust Banks and BB&T announced on Thursday morning that they were joining forces in a $66 billion deal.
- In the statement announcing the transaction, the companies said the deal would produce about $1.6 billion in “synergies.”
- Synergies are what you get when you eliminate redundancies to cut costs, and they most likely mean some employees will be let go.
Assuming the deal is approved by regulators, it will create the sixth-largest US bank. But companies don’t just do deals to make their presence known — they do deals to increase shareholder value.
In the joint statement announcing the deal, the companies said (emphasis ours):
“Expected to deliver approximately $1.6 billion in annual net cost synergies by 2022. The primary sources of cost savings are expected to be in facilities, information technology/systems, shared services, retail banking and third-party vendors.”
What are these “synergies”?
Synergies are what you get when you eliminate redundancies to cut costs. In this case it could mean closing or combining branches, offices, or technology systems. For example, if the two banks each had a branch on the same street corner, they might need only one of those branches and could save money by closing the other.
Unfortunately for employees, such synergies often come with job cuts.
SunTrust employs 23,800 people, while BB&T employs about 35,850.
Here’s a very rough back-of-the-envelope calculation that should be taken with a grain of salt: Suppose that a quarter of the synergies come in the form of job cuts and that each worker costs $75,000. That means more than 5,300 of the almost 60,000 workers at the combined company would be let go.
The companies haven’t announced or quantified any reductions in headcount. But those announcements are probably coming.