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Due to the current volume of mergers and acquisitions, the number of credit unions continues to decrease, so it may only be a matter of time before your credit union engages in a mergers and acquisitions (M&A) conversation. For credit unions that have undertaken a merger or acquisition before, they may have developed a routine based on lessons learned. In most cases, however, this process is unfamiliar territory for credit union executives and requires thorough planning, so nothing is lost in the mix.
To address this all-important topic, Samaha & Associates recently published a free white paper, A Credit Union's Roadmap to Successful Mergers & Acquisitions—Technology Decisioning and Implementation Best Practices in 2024 and Beyond, which I co-authored with Samaha & Associates Managing Consultant Adam Denbo and Senior Consultant Janeace Liles. The purpose of this white paper is to provide credit union executives—whether from the surviving credit union or the credit union that is being acquired—with a “best practices” roadmap to M&A.
Among facts presented in the white paper is that in the third quarter of 2023, the NCUA reported credit unions are acquiring regional banks. To this end, 34 bank acquisitions were announced that quarter and of that number, six were acquired by credit unions. Additionally, the NCUA reported that the median size of acquiring credit unions was $148 million. This included nine credit union acquirers with assets exceeding $1 billion, and 14 credit union acquirers with assets below $100 million. The mean and median assets of merged credit unions were respectively, $24.3 million and $14.1 million. By the second quarter 2024, the NCUA reported the consideration of more than 75 consolidations.
Technology-Driven Best Practices
We are firm believers in the “people helping people” ethos and have been a strong supporter of the credit union movement for more than 26 years. With his white paper, we provide credit union executives with a technology-driven “best practices” roadmap for mergers and acquisitions.
For executives to deliver a seamless transition, they must be prepared to honestly answer detailed questions about all aspects of their operation—like a request for proposal (RFP) on steroids. If vetting a new credit card system or implementing a new core platform is considered daunting, then my friends, it is time to buckle up.
Included in the white paper is a “Top 10 Mergers and Acquisitions Technology Questions” list, a “Gap Analysis” check list and “Five Mergers and Acquisitions Tips from Proven Technology Consultants.”
As an example, number three on the latter tips list is: Determine the following differences: product, service, fee, dividend rate, interest rate, third party software, core system, digital banking platform, loan origination system, Visa/Mastercard brands, real estate origination, and general ledger.
Eliminate M&A Surprises
To date, we have successfully executed more than 30 M&A projects, and our team of seasoned professionals is currently engaged in five M&As for credit unions of varying asset classes. We are now also being contacted by more returning clients asking the firm to proactively seek credit unions that want to merge, which indicates a shift in industry norms.
The leading reasons a credit union is ripe for acquisition is usually due to the following criterion: membership is in decline; a decreased net worth; reduced or negative earnings; lack of a senior leadership succession plan; lack of digital services; and strategic planning shortfalls. Whether from the standpoint of the surviving credit union or the credit union that is being acquired, we developed this white paper to offer comprehensive guidance.
When it comes to studying M&A, our consultants understand where the risks, threats and gaps are during each step in the process—whether high-level or from a granular, tactical perspective. There are no surprises because consultants have an expert line of sight that brings forth awareness, avoiding unnecessary hurdles that negatively impact service levels to membership as well as operational impacts on staff.
Please click for a free copy of A Credit Union's Roadmap to Successful Mergers & Acquisitions—Technology Decisioning and Implementation Best Practices in 2024 and Beyond.
Realizing the strong demand for dependable technology consulting services, Sabeh Samaha founded Samaha & Associates, Inc. in 1998. Sabeh continually shares his strategic and tactical expertise by writing white papers, conducting workshops, and speaking at regional and national credit union conferences. Frequently cited as a technology and payment systems expert in leading credit union publications, he is a hands-on consultant who firmly believes in the “people helping people” movement. Sabeh’s motto is: Think hard. Work harder. Chase dreams, not money.
