CU Crossroads – 5 Question Series brings a conversation with John Dearing, MD and Partner at Capstone Strategic

john dearing

The next credit union industry thought leader joining us on CU Crossroads- 5 Question Series was John Dearing, Managing Director and Partner at Capstone Strategic. The topic of discussion with him was ‘Mergers & Acquisitions in the CU and CUSO Market’. He shared many interesting trends including the M&A between credit unions becoming more strategic than just bigger credit unions gobbling up the financially distressed ones. He feels that recent times might call for reversal of this trend. Below are the takeaways from his interview:

  • Credit union mergers are continuing, but the pace has slowed in the past couple of years. The pandemic has created additional uncertainty around M&A activity for the remainder of 2020.
  • In the low interest rate environment, some credit unions are looking at acquisitions of CUSOs to increase noninterest income. M&As with CUSOs are a trend that continues to increase year-over-year. Analytics are AI are two hot areas.
  • In the past, many mergers happened in response to financial distress. In recent years, the M&A activity has become more focused on strategic acquisitions. One effect of the pandemic may be a reversion to more M&As of financially distressed credit unions, and the pace could potentially accelerate.
  • There are more credit unions seeking out collaborations and CUSOs to quickly fill voids in expertise. There is a growing emphasis on shared services and partnerships as credit unions recognize that they can’t – and shouldn’t – handle everything internally to maximize resources and efficiency.
  • Credit unions that are thinking about an M&As should be clear on what they are trying it accomplish and determine if an M&A is the right solution. It is one option of many and is not a cure-all for every issue that credit unions face. M&As can be a valuable strategic tool for filling gaps – but credit unions should never be afraid to say no to opportunities that don’t truly achieve their goals.