Merger Exuberance:  Preparing for the Future or Signaling a “Mature” Industry

CUNA and NAFCU are now joined.  Coming right behind is the announcement of COOP and PSCU’s combination by yearend.

What are the implications of these large scale mergers? According to the participants, they are preparing for a more ambitious future.   However some  analysts  see mergers  as a sign of declining opportunities and creativity as an industry enters a  maturing, slower growth  phase.

One Observer’s Take: A Wake Up call

“First NAFCU merges with CUNA, now PSCU and COOP.  This should wake up the rogues amongst us – opportunity calls.

“Once sold as the titans of hope, they are now seen as one trick ponies riding old ideas and copied solutions.  No longer is their faith in ownerships’ will, unique competitive differences nurtured, and innovation cast from confidence  in their  community.  These players rode their vehicles into the ditch.

“There is no sincerity leveraging others, margins guaranteed without value shared, or room left for the creativity of leaders whose credit unions these firms were designed to serve.”

How Should Credit Union  Owners Evaluate the Latest Proposal?

In both mergers the details of the combinations are at best scarce.  Most of the justifications  are rhetorical: “ speak with one voice”;  “ we are stronger together than we are separately”;  “a transformative opportunity to bring broader opportunities and products.“  And, “the merger brings together teams with a similar mission/vison and comparable values and cultures. “

There is also future hope: “The combination offers credit unions increased scalability, access to best-of-breed technology, unparalleled services and differentiated value, fostering long- term success and sustainability for the credit union movement.”

This is the language of marketers and PR, not operations. It is a script one can find in almost every significant coop merger. There are no facts or data, except to clarify  who will be running the show:  CUNA in one case; and PSCU  in the second.

How are the credit union owners who built these organizations with loyal patronage, capital support and volunteer leadership resulting in financially independent organizations, to evaluate these future promises?

Some thoughts:

  • Ask for the latest financial statements and the 2-3 year trends. How will the combination affect the member-owners’ financial stakes?
  • What will the key financial indicators look like in the first year including operating expenses, revenue goals, and net income?
  • What gains and losses (write downs) will the two organizations incur from the merger that would otherwise not have occurred?
  • How will existing third party relationships be evaluated?
  • What are the projects and investments that will be post-merger priorities?

These operational questions are critical. The political decisions to combine are the easy steps; implementing a merger is difficult especially if there are no concrete goals, measures or key success factors identified up front.

Owners are asked to transfer the results of their cumulative years’ relationships into a new entity without any stated outcomes.

Concrete objectives should be part of the dialogue.   Organizational alignments and who will lead the new firm are important. But leadership will change. Some specific benchmarks and benefits should be an important part of the dialogue to come.

Why the PSCU-Coop Combination?

A former CEO of a credit union owned technology provider had the following assessment motivating this event.

This is a transaction born years ago in the mind of executives trusting in the destiny tied to the path of “scale” – this is the only route for aggregators and deal makers.

Neither firm had the heart of a manufacturer of technology. The primary asset they sold their clients was affiliation.  In their minds the concept of clients as the owners of unique solutions was not an advantage. Rather it was viewed as more of a disadvantage with CUs limited by the very model of cooperatives, non-profit roots, and their virtual ownership aspects.

They were and are simply re-marketers, sales firms leaning on the value propositions of other firms. They will merge and take smaller and smaller returns as the owners of design, manufacturing, and their true competitors take a piece of negotiated solutions. 

As aggregators, they never owned the right to price, the right to equity, or the will to create.

Both were valuable players in credit union history, but not creative forces or protectors of what it means to focus on the power of ownership underwritten and  guaranteed through cooperative design. 

There are new days and new architects ahead with models which rely on the uniqueness of cooperative themes reborn to new needs. These firms drank the wrong Kool-Aid.

The Opportunity for Credit Union Innovators

It is important that credit union leaders not assume merged organizations will power the future or be the primary source of improved solutions.

Instead they signal opportunity for new marketplace entrants.  Now is  a time for new value propositions, new energy around execution, and old ideas  presented differently and considered again.

Merged businesses do not naturally create a strengthened survivor. These large mergers create artificial Goliaths repositioning from intra-industry challenge.

The result is not marketplace gained organic success.  Rather the events point to business assumptions requiring substantive review.

In the end, over-confidence on scale may actually hinder innovation and system resilience.  Until new coop disrupters emerge.




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