Why You Need A Merger Strategy
“More and more credit unions are recognizing that they can strategically position themselves to better serve their members through mergers. The credit unions gain the ability to expand with more branches, build capital, attract and retain quality staff and leadership, enhance buying power, diversify their portfolio and membership, and offer additional products and services for members—positioning the combined credit unions for greater success than each could achieve individually.” |
C. Alan Peppers, President/CEO, Westerra Credit Union |
Mergers are the New Reality for Credit Unions
The clear market trend is toward intentionally selected mergers that increase member value. In 2005, there were 303 mergers completed across the country... This number is expected to continue to grow in the coming years.
The reasons credit unions are choosing this strategy relate to three key desires:
Growth through mergers is one part of some credit unions’ growth strategy. Credit unions are facing the market reality that size and skill make a difference in our ability to compete - and position us to better serve members. This key strategy can make the difference in determining viable organizations in the future.
Increase Member Value
Mergers can significantly benefit the membership. Credit unions are in business to serve members. That’s the foundation of what we do. Members experience many benefits through a larger credit union, including access to expanded products and services, better pricing and rates, access to more convenient locations, added technology enhancements, and future staying power of the credit union. It is the Board and Management’s responsibility to make active decisions about strategies that can benefit the membership.
Improve Credit Union Performance
Being larger is more important for credit unions than previously perceived. To remain a viable player in the financial services marketplace, credit unions need to create the necessary economies of scale. Statistics show that larger credit unions consistently deliver much better growth rates, efficiency and profitability over time. Mergers are the fastest way to gain economies of scale.
Compete Effectively in the Marketplace
Credit unions are operating in a highly competitive and changing environment. The savings rate in the U.S. is negative for the first time since the Great Depression. This means there is fierce competition for deposits, which means narrower margins for credit unions.
The ever growing presence of national and international banks with vast resources, and the high expectations members have for a full line of products and services-with the latest technology-cause credit unions to look for ways to remain viable.
Some credit unions acknowledge the fact that the world of credit unions is in a state of consolidation-and realize that credit unions need to pursue partnerships or mergers to become stronger. Rather than waiting for change, credit unions can leverage partnership opportunities to serve members better and position themselves for the future.
How to Develop a Merger Strategy
It is important that every credit union have a Merger Strategy-a shared foundation for the CEO, the Board and the senior management team as a whole in your credit union’s approach to mergers. The Merger Kit leads you through the development process. Click here to view a sample merger strategy statement.
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