CEO Advisory Group
Careful Planning is Essential to Successfully Executing a Merger with Another Credit Union
Difficult economic conditions, increased funding costs and competition from larger institutions will continue to drive credit unions to combine to sharpen their competitive edge. The number of mergers of credit unions with assets of $500 million and above has increased in recent years, notably two of the largest credit unions in Minnesota, Firefly and TruStone, and New York, SEFCU and CAPCOM, recently joined forces. Despite the possibility of more mergers among large credit unions, mergers among small and midsize credit unions are likely to make up the bulk of the merger activity in the months ahead, as these institutions need scale to combat declining loan volumes, margins, and membership.
While credit union mergers of all sizes remain a sound growth strategy, there have been three credit union mergers since 2020 that have been voted down by members. Such risk of failure is a reminder that inadequate planning for a merger, including failing to negotiate and enter into a comprehensive merger agreement that sets forth in detail the terms and conditions of the merger and protects the rights of both the merging and continuing credit union, can lead to a failed transaction.
The current environment – intensified activism from members who may oppose a merger with a larger credit union and increased regulatory scrutiny – warrants parties to thoroughly plan for all aspects of their merger, which should include a shared vision that ensures the parties are aligned on cultural and operational matters as a combined entity and how the merger is in the best interests of members.
Jeff Cardone
Jeff Cardone represents community banks, credit unions and other financial institutions, focusing primarily on transactional matters, including mergers and acquisitions, purchase and assumption transactions, credit union acquisitions of banks, mutual-to-stock conversions, mutual holding company formations and public offerings and private placements of subordinated debt/secondary capital. Mr. Cardone has worked on many complicated transactions in the financial services industries involving credit unions, including the largest credit union merger completed based on the net worth of the merging credit union and credit union/bank acquisition transactions that have established precedent in certain state jurisdictions. Mr. Cardone also counsels financial institutions and their board of directors on regulatory compliance, corporate governance, SEC reporting, listing standards of national stock exchanges, state fiduciary duty law and executive compensation matters.
