Why Banks May Need M&A to Succeed Post Pandemic?

The recent COVID pandemic impacted the day-to-day operations of banks. Banks were among those industries that were seriously affected by the COVID pandemic. People were not making deposits and transactions via physical banks. Instead, they preferred going cashless during the pandemic era. Poor cash flow, market disruptions, change in interest rates, credit risks, and many other factors pushed banks over the edge during the pandemic. Now, as the pandemic is slowing down, banks need better business strategies to ensure business continuity. Read on to know why banks may need mergers and acquisitions to succeed post-pandemic.

Mergers are a boon for banks

Large banks may have ample funds to take a hit for one or two years. However, small banks had no means of generating profits during the pandemic. Also, they didn’t have ample funds to start operating at full capacity post-pandemic. As a result, small banks either ceased to exist or had to cut down operational costs. However, some small banks are merging to fight the challenges raised by the recent pandemic.

Small banks cannot cover more geographical areas due to limited staff and physical branches. By merging, they can together cover more geographical areas post-pandemic. M&A can increase the market share for banks significantly. When two banks come together, they can tap a greater target audience to increase the market share. M&A also increases the competitiveness of a bank. It is better to merge with other banks post-pandemic than give up due to high competition.

Banks have to cope with many risks raised by the recent pandemic. If they partner with other banks, risks can be diversified. The biggest challenge is to bring the customers back to physical banks post-pandemic. Customers love fintech services and don’t prefer to go to a physical bank for a deposit, loan, or any other financial assistance. By merging with other banks, you can provide online financial services with the aid of Fintech technology.

Not only small banks but also large banks look for M&A support. Large banks have also been out of business during the pandemic era. Some large banks retained most of their customers by offering fintech solutions. However, large banks need to maintain their cash flow post-pandemic. It is why large banks are acquiring small banks that cannot operate independently. It is better to take over the existing customers of a small bank rather than letting them shut down. Mergers/acquisitions help in synergizing the productivity of two entities. 

Where to look for M&A advisory?

 There are many complications with the M&A process. You need to maintain a lot of paperwork before merging with another bank. Not to forget, due diligence is also required before acquiring a bank or merging with one. It is why you should look for a third party that can offer M&A support. Banks should rely on hiring in-house M&A experts to add to the operational cost. Instead, outsource the M&A process for better productivity. Adopt an M&A strategy to succeed post-pandemic!