Proactive Collaboration is the Future of Credit Union Mergers

Credit Union 2.0: An Opportunity to Build Collaborative Partnership is an outstanding report by Filene Research Institute provided courtesy of the Credit Union Times.

This report illustrates the power of collaborative partnerships as exemplified by the merger of three Wisconsin credit unions.

In our practice we have in the last decade seen a significant shift in the attitude towards mergers. Over the last several years credit unions large and small have engaged us to facilitate discussions to explore collaborative mergers.  These are credit unions where both parties are doing well financially, but they recognize collaboration may be the key to an even brighter future for members, staff and the community.   Whether it is two $1 billion Credit Unions or three $25 million dollar credit unions discussing the collaboration, the end objective is to provide more for the stakeholders while building a stronger credit union.

The Filene Report makes a very astute observation. “Traditionally, mergers within financial services tend to involve unhealthy, smaller institutions being acquired by stronger, larger institutions. However, more interesting opportunities lie in aligning interest and developing collaborative partnerships between credit unions.”  Increasingly, we find many credit unions don’t want to dance with a merger partner unless they are financially strong and of significant asset size.  These credit unions seek a mutually beneficial collaboration, not a takeover.

We agree with the Filene Report — “Proactive collaboration will be the ingredient of choice for credit union merger of the future. Mergers driven by collaborative partnerships will help credit unions align interests, build strength, and broaden member products and services.”

Credit unions we have worked with have been able to redeploy the savings resulting from the merger into more branches, new technologies, improved staff compensation/benefits, and increased engagement with the community.

As the credit union industry consolidates (see our blog post Average CU $2 Billion in Assets) and credit unions face increased competition from non-traditional providers, collaboration in its many forms will provide credit unions a competitive edge.

The power of collaboration is a win for all the stakeholders.