How Mergers of Equals Actually Work in Credit Unions
Learn how MOEs are structured, key factors to address, and how to ensure a merger that benefits members, employees, and stakeholders.

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Historically, Merger of Equals (MOE) transactions have been common in financial services, including credit unions, to remain competitive in an industry that increasingly favors size and scale. A MOE allows a credit union to roughly double in size and use efficiencies of scale to allow for investments in technology, products and branding that are critical to growing membership in the CU movement. These investments can be spread over a broader base of revenues, help drive additional cost savings and offset significant fixed costs.
Merger of Equals are Very Rarely Put Together Overnight
Since the beginning of 2020, there have been nearly ten MOE’s between mid-sized credit unions (between $250 and $750 million in assets) to reach around $1 billion in proforma assets. MOEs were an attractive alternative for these credit unions that would not otherwise have the opportunity or financial capability to launch a large-scale expansion program to survive and better serve their members and communities. Also, there have been several credit unions with over $1 billion in assets entering into MOE transactions over the last several years. And most recently, the 4th quarter 2024 announcement of the First Tech and Digital FCU merger, both $10 billion plus institutions, could lead to more MOE’s of larger credit unions.
With membership as mutual owners, a major impediment to a MOE being pursued is removed. The absence of a substantial stock price takeover premium for publicly traded depositories has been a key impediment for those depositories.
We expect that more credit unions will evaluate whether an MOE could be their best avenue to remain competitive in an increasingly digital banking world and create value for their key constituencies.
Any credit union considering a potential MOE transaction should be prepared for many exploratory discussions, as it will likely be a deliberate process to find the right partner. It is not surprising that many MOE discussions never result in a transaction given the complex business considerations and personality issues.
Key Issues to be Addressed in Merger of Equals Structures
From the very beginning, an MOE requires a “strategic vision” that identifies two credit unions with compatible cultures and management teams. Importantly, this strategic vision must be shared, and cooperation must begin with the two CEOs and Boards of Directors. Difficult decisions often arise, making it essential to reach early consensus on key challenges, including:
- Split of the Board of Directors (typically a 50/50 split, but could be 60/40 too)
- Split of the Chairman and CEO position
- Selection of the senior management team
- Regulatory consequences
The rationalizations of separate corporate cultures, including issues such as:
- Compensation plans
- Management style
- Operating priorities
- Future business strategies
Symbolic issues such as:
- Company’s name
- Location of headquarters
When all these factors align, a merger of equals can be one of the most effective and successful forms of business combination.
Merger of Equals Often Provide for a CEO Succession Plan
Mergers of equals, in particular, provide a valuable opportunity to implement CEO succession planning. Whether a senior executive plans to depart at closing, remain for a transition period, or take on a leadership role in the combined credit union, it is essential to take a thoughtful and strategic approach to integrating leadership teams and long-term management plans. In a highly competitive industry, strong leadership remains one of the most valuable assets.
Demonstrating the Value of the Merger to All Stakeholders
MOE transactions impact all the credit union’s key stakeholders, including members, employees, communities, and regulators. Each stakeholder must be appropriately considered and addressed, with clear communication plans in place.
For members, a clear description of the benefits of MOE, such as enhanced capabilities and an expanded product suite. Also, the increased scale enables continued technology investment and client experience improvements.
For employees, it’s essential to communicate a shared corporate culture and operational philosophy while ensuring a balanced leadership structure that represents both teams. Any redundancies, and the plan for a “soft-landing” for certain employees should be articulated too.
Defining Success
Importantly, both organizational and cultural fit are absolutely critical to ensuring success.
Successfully executing a well-conceived MOE transaction requires strong leadership from the board and senior management to form a cohesive combined credit union. That leadership will need to avoid certain traps and deal killers. A successful merger requires making tough decisions early, maintaining flexibility on key issues, and setting egos aside. One of the biggest threats to a deal is the tendency to "keep score" between partners, which can lead to deadlock over decision-making authority. Clarity, collaboration, and a shared commitment to the merger’s success are essential to moving forward effectively.
Due diligence on the part of both parties to the merger is an indispensable prerequisite to informed decision making, as is detailed analysis of pro forma financials and contribution analyses. Especially critical factors are risk assessment and regulatory compliance. Our Merger Member Benefit (MMB) approach is a way to show, from a financial point of view to the members, that merging is a benefit (or not!) to members. The MMB effectively acts as up-front due diligence and can provide insight into product pricing and gaps as well.
Conclusion
Overall, a MOE decision should be based on an opportunity to make the greatest impact for your members. Parties involved in a merger of equals should anticipate rigorous scrutiny. The strategic and financial rationale must be thoroughly evaluated to ensure a strong, defensible case—mitigating the risk of opportunistic challenges that seek to exploit any perceived weaknesses. In the end, a successful MOE leverages the strengths of each institution to become more than the sum of its parts.
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Mergers