For credit unions, mergers and acquisitions have proven to be powerful strategies for expanding market share, enhancing capabilities, and maintaining competitiveness. Rather than simply focusing on growth for its own sake, mergers and acquisitions allow credit unions to better meet the evolving needs of membership while strengthening long-term stability.
“Organic growth, what you do on your own, like building more brick and mortar branches, widening your service area and membership drives can certainly work, but not on the scale of a merger,” explains Sheila Balzer, the Lead Audit Partner for SingerLewak’s Credit Union Services.
Credit unions are increasingly turning to M&A’s as a strategic tools. It’s far from a new trend, just one picking up more steam. From 2010 through 2022 there were 2,676 credit union mergers. Even advocacy groups have jumped on this particular bandwagon. The Credit Union National Association (CUNA) and National Association of Federally Insured Credit Unions (NAFCU) consolidated, becoming America’s Credit Unions.
Service and Stability
There is strength in numbers and the credit union pursuit is primarily a way to expand and improve services, and reinforce stability. “Credit unions don’t have to have Navy Federal aspirations,” says Balzer. “Credit unions aren’t trying to placate investors on Wall Street who generally have a ‘bigger is always better’ mentality. Is this good for the membership? Is this good for our team? Is this good for our future? Those are some of the questions you have to answer.”
The union of two credit unions often results in a more comprehensive menu of products and services. That enables the combined entity to better fulfill the needs of members. That strengthens retention, and retention is growth’s best friend.
By consolidating resources, institutions can achieve economies of scale, spreading fixed costs over a larger base. This leads to improved operational efficiency, lower per-member costs, and a more resilient financial position, ultimately benefiting members by ensuring long-term sustainability.
Technology
Technology is at the forefront of today’s financial services. M&A’s often provide credit unions with the means to invest in, or adopt cutting-edge technologies. From friendlier websites to upgrading digital banking platforms, implementing advanced cybersecurity measures, and incorporating artificial intelligence for more personalized member experiences. Through mergers and acquisitions, credit unions can pool resources to stay ahead and ensure they remain relevant.
Geographic Expansion
Mergers and acquisitions offer credit unions the chance to expand their reach and influence by entering new markets. Geographic diversification not only allows credit unions to tap into untapped member pools but also strengthens their overall market presence. A broader footprint can translate into increased brand recognition, a larger membership base, and greater opportunities for growth of the organic kind.
Operational Efficiencies
Streamlining operations is another key advantage of mergers and acquisitions in the industry. Consolidating administrative functions, merging back-office operations, and optimizing processes lead to cost savings. These efficiencies contribute to a more effective allocation of resources, allowing credit unions to focus on delivering superior member service and innovation rather than grappling with redundant operations.
Sheila Balzer believes the benefits of mergers and acquisitions are multifaceted, but far from mandatory. “A move like this can make dollars, save dollars, but may not make sense,” Balzer says. “It has to be right, which doesn’t always mean, ‘right now.’”
As the industry evolves, the power of unity through M&A emerges as a transformative force shaping the future of credit unions. If your institution is considering a merger, meet with our Credit Union Services first.
Learn more about Sheila Balzer and SL Credit Union services.
