Why Modern Accounting Systems Are Essential for the Future of Banking M&A

banking M&A

Why Modern Accounting Systems Are Essential for the Future of Banking M&A

Since 2018, credit unions have been increasingly active in acquiring banks, peaking in 2024 with 22 credit union acquisitions, up from the previous high of 16 in 2022.

While the overall number of credit union mergers has decreased compared to the previous decade, the total assets acquired in mergers increased by 58% in 2024, compared to 2023.

What’s driving the future of M&A in banking?

  1. Regulatory Uncertainty – Stricter compliance requirements make it costlier for smaller banks and credit unions to do business. For many financial institutions, a more ambitious M&A agenda may be easier to pursue under the new federal administration, which is expected to relaxing banking regulations.
  2. Fintech Disruption – Traditional banks are merging to enhance digital banking services and remain competitive.
  3. Operational Cost Reduction – Consolidation allows financial institutions to share infrastructure, reduce redundancies, and improve profitability.
  4. Economic Uncertainty – Institutions are seeking stability through strategic partnerships and acquisitions to navigate fluctuating interest rates and economic shifts.

Two buildings merging together to symbolize M&A activity

Mergers & Acquisitions Trends in Banking & Credit Unions

  • In 2024, 215 deals that were greater than $30M in value were announced, compared to 151 deals of the same value in 2023.
  • Among the top 50 U.S. banks, there were 3x as many banks open to acquiring or actively pursuing acquisitions in 2024 vs. 2023.
  • A recent survey found that 65% of financial institutions view M&A as a strategic priority for expanding market reach and enhancing digital offerings.

Source: S&P Market Intelligence

While M&A can bring growth opportunities, it also introduces significant financial complexities. 

Accounting Challenges When Merging Financial Institutions 

  • Financial Data Consolidation – Combining different accounting systems, reporting structures and financial records is complex and time-consuming.
  • Regulatory Compliance & Reporting – Banks and credit unions must be able to adapt to changing reporting requirements, which become more intricate during mergers.
  • Accounting Policy Differences – Variations in revenue recognition, loan classifications, and other accounting methods must be reconciled to ensure financial accuracy.
  • System Integration Issues – Legacy accounting software may lack the flexibility to integrate with a newly merged entity’s operations.

A modern accounting system designed specifically for banks and credit unions can streamline the consolidation process and ensure compliance. 

How a Modern Accounting System Simplifies M&A Integration

  1. Seamless Financial Data Integration

A cloud-based accounting system designed for financial institutions can automatically consolidate financial records, ensuring real-time accuracy and reducing manual data entry errors.

  1. Automated Regulatory Compliance

Regulatory frameworks such as CECL, FAPP, and FDIC reporting require precision. A modern accounting system ensures automated compliance, reducing risk during audits and regulatory reviews.

  1. Real-Time Financial Visibility

M&A success depends on data-driven decision-making. A robust accounting platform provides real-time dashboards, financial forecasting, and analytics to support growth strategies.

  1. Scalability for Future Growth

As banks and credit unions continue to grow, a scalable accounting system accommodates additional branches, loan portfolios, and regulatory changes without disruptions.

  1. Streamlined Operational Efficiency

By eliminating redundant processes, reducing manual reconciliation, and enhancing financial reporting, merged institutions can operate more smoothly from day one.

See how Idaho Central Credit Union (ICCU) automated its accounting process and saw a significant impact on productivity.

The complexity of merging financial entities demands a robust accounting framework to effectively manage financial reporting, credit risk assessments, and tax implications. 

As the banking and credit union landscape continues to evolve, institutions that invest in a modern accounting system that is purpose-built for their unique business challenges will be better prepared for future mergers, acquisitions, and regulatory shifts.