By W.B. King
According to a recently published Samaha & Associates white paper, A Credit Union's Roadmap to Successful Mergers & Acquisitions—Technology Decisioning and Implementation Best Practices in 2024 and Beyond, there continues to be an uptick in credit union mergers and acquisitions (M&A), but not just in the credit union space.
In the third quarter of 2023, the NCUA reported credit unions are continuing to acquire regional banks, the white paper noted. 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.
“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 conversation,” noted Samaha & Associates CEO Sabeh Samaha, who co-authored the report with Managing Consultant Adam Denbo and Senior Consultant Janeace Liles.
Don’t Get Lost in the M&A Sauce
Specializing in vendor contract negotiations, core system conversions, third party vendor searches and implementations, payments program assessments, regulatory compliance, and M&A, among other services, the Miami-based Samaha & Associates has been serving the credit union industry for more than 26 years.
“For credit unions that have undertaken a merger or acquisition before, they may have developed a routine based on lessons learned,” stated Denbo. “In most cases, however, this process is unfamiliar territory for credit union executives and requires thorough planning, so nothing is lost in the mix.”
The white paper, explained Liles, provides credit union executives with a technology-driven “best practices” roadmap for M&A.
“For executives to deliver a seamless transition, they must be prepared to honestly answer detailed questions about all aspects of operation—like a request for proposal (RFP) on steroids,” Liles shared. “If vetting a new credit card system or implementing a new core platform is considered daunting, it is time to buckle up.”
Among white paper highlights 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.”
When It Comes to M&A, Credit Unions Must Be Proactive
To date, Samaha & Associates has successfully executed more than 30 mergers and acquisitions, said Samaha, adding that his team is currently engaging in five M&As for credit unions of varying asset classes. “What is more surprising is that we are now being contacted by more returning clients asking the firm to seek credit unions that want to merge,” he shared.
The leading reasons a credit union is ripe for acquisition, Denbo said, is normally due to the following criteria: 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, the white paper offers comprehensive guidance, noted Samaha.
“When it comes to studying mergers and acquisitions, seasoned consultants understand where the risks, threats and gaps are during each step in the process—whether high-level or from a granular, tactical perspective,” Samaha continued. “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.”