At the core of any merger, there is an opportunity for the merging credit union to cut operational costs, increase capital, improve regulatory compliance, diversify labor, and expand product and service offerings.

Sources: NCUA and CUNA (2009b).

Over the years, Filene has delivered key research and data on the prevalence and impact of credit union members. The How Credit Union Mergers Affect Service to Members report looked at more than 1,600 credit unions prior to their merger and for the three years following it. In 80% of the mergers studied, small credit unions benefitted significantly improving their service levels by 25%, while larger credit unions improved by 14%.

Averages don't tell the whole story, of course. Small to mid-size credit unions can thrive on their own, but conscientious leaders should always consider opportunities to align with larger credit unions that can help them become more efficient, expand reach, and improve service offerings.

Since 1969, there have been more than 13,000 credit union mergers and a smaller number of liquidations. The Filene report Impacts of Mergers on Credit Union Costs: 1984 – 2009, discovered that in the average credit union merger, members of the smaller merging partner or the target, experienced large reductions in noninterest expense (–0.79% percentage points) and offered better loan rates to members (interest income falls by 0.51% percentage points). In about half of the mergers, the impact on noninterest expense was relatively small at under 0.20%. But 34% of the credit unions studied saw a large decrease in expenses, while 21% saw a large increase.

Beyond mergers, interesting opportunities lie in aligning interests and developing collaborative partnerships between credit unions. Within the industry, there has been an increase in traction around mergers of equals. Unlike traditional merger arrangements, these MOEs are collaborative ventures where all of the key parties are financially stable and similar in size. They are mainly driven by regulatory pressures and member demand. This is a great option for same-size credit unions looking build strength with local or regional competitors.

The Filene report Collaboration in Practice: 11 Credit Union Case Studies analyzes how collaboration requires time, effort, compromise, and commitment.

Proactive collaboration will be the ingredient of choice for credit union mergers of the future and by default, should come naturally for financial cooperatives; banks have less incentive to collaborate because of their for-profit nature.

Capital is not enough. As with Disney and Pixar, credit unions that want to merge from a position of strength or support a large-scale collaboration have to be honest about the assets they bring. You will be a more attractive partner if you offer managers, markets, or capabilities that are otherwise hard to come by.

In the case of Disney, Pixar helped diversify Disney's offerings by integrating computer animation across their various business networks. While Pixar could have opted to maintain a distribution relationship with Disney instead of being acquired, the entertainment channels and resources Disney provides them are invaluable. To infinity and beyond, indeed.

Manpreet Nat is a research associate at the Filene Research Institute. He can be reached at 608-661-3752 or [email protected].