Executive Summary
Mergers are important. A steady stream of credit union consolidations in recent years shows that by combining and consolidating operations, credit unions are creating opportunities to cut costs, increase capital, improve regulatory compliance, diversify labor, and expand product and service offerings. Traditionally, mergers within financial services tend to involve unhealthy, smaller institutions being acquired by stronger, larger institutions. However, more interesting opportunities lie in aligning interests and developing collaborative partnerships between credit unions.
Credit unions must collaborate in order to thrive. More and more credit unions are putting this belief into action. Recently, three Wisconsin credit unions decided to combine, each from a position of strength. Best Advantage, CitizensFirst, and Lakeview all determined it was in their best interest to explore Credit Union 2.0—a partnership that would be driven by extensive collaboration. This research outlines the steps these three credit unions took toward Credit Union 2.0. To that end, this three-way collaborative merger will pave the way for other credit unions to explore similar partnerships to do right by their members, employees, and communities.
What is the Research about?
To glean direct insights, Filene spoke with Tammy Williams, Kevin Ralofsky, and Pat Lowney, the CEOs of Best Advantage, CitizensFirst, and Lakeview, respectively. All three share a focus on collaboration as a means to combat competitive pressures, technology challenges, and regulatory burden. As Filene met with the collaborative team behind Credit Union 2.0 and discussed the journey that brought them to the decision to merge, we were struck by the fact that they had embraced the idea of working together to align common interests. Their experience supports Filene’s long-held belief that strategic collaboration will be key for credit unions’ continued success.
In recent years, we’ve seen interest in mergers that are collaborative ventures rather than takeovers, so-called mergers of equals. These differ from traditional mergers in a number of key ways:
- The institutions tend to be closer in size.
- The institutions are financially healthy.
- The merger is proactive.
- Scale, regulatory pressures, and member demand for more services drive the merger decision rather than economic difficulties or financial performance.
What are the credit union implications?
With their for- profit nature, banks have less incentive to collaborate; the credit union system, with its smaller size and cooperative structure, has both the ability and the motivation. In order to ensure the viability of a collaborative merger, credit union leaders should keep the following in mind:
- Choose the appropriate partners. Collaborative mergers will only be successful if there is a mutually beneficial value proposition on the table. All of the key stakeholders should share a similar vision.
- Earn buy-in. CEO support is only part of the story. Without the backing of members, staff, and the board it will be difficult for any merger to gain traction. Convincing multiple board members across multiple credit unions can be arduous, but it is a necessary component of any collaborative business model.
- Explore shared interests/problems. In every collaborative merger, there will be one entity that maintains its charter and takes a leading role both operationally and strategically. Having conversations early and often can help all of the participants recognize shared interests, problems, and challenges.
- Invest. By working together, credit unions can tap into a broader array of expertise that will lead to the delivery of new products and services. This is especially helpful for smaller credit unions that need additional resources to expand their product offerings.