In my 30+ years of experience in the banking industry, where I have been deeply involved in numerous mergers and acquisitions (M&A), I’ve learned that the true value of these transactions often lies beyond the initial plan.
A critical lesson is that hidden or unexpected synergies — benefits not identified during due diligence — can transform a deal’s outcome. In 2024, U.S. bank M&A activity was strong with 130 deals and a total value of $16.8 billion, according to S&P Global. 2025 is looking to be a robust year for M&A on track to surpass last year but still under the peak of 256 deals in 2019 — so far, we have 45 deals. Meanwhile, in 2024, credit union M&A deals were 155. In 2025, there have been 41 announcements already. While traditional synergies — revenue, cost, and financial — are essential, these hidden opportunities, such as renegotiating vendor contracts or tapping new customer segments, can greatly enhance deal value.
The banking sector is consolidating due to competitive pressures, regulatory changes, and technological advancements. Mergers aim to achieve economies of scale, expand geographic reach, and enhance digital capabilities. Synergies drive value creation and are typically categorized as:
Hidden synergies, on the other hand, emerge during integration or post-merger phases, offering opportunities like vendor contract savings or unexpected revenue streams. With banks facing margin compression and rising costs, hidden synergies are vital for maximizing M&A value.
Hidden synergies are diverse, often uncovered through strategic analysis or opportunistic negotiations. Below are key types of such synergies, with examples illustrating my point:
1. Vendor contract renegotiation: Merged banks often inherit overlapping vendor contracts for services like core banking solution or cybersecurity. Post-due diligence reviews can reveal chances to renegotiate terms or reduce penalties, turning costs into savings.
2. Technology rationalization: Technology rationalization is a significant source of cost synergies. By integrating the best technology systems from both banks and eliminating duplicate or outdated technologies, the merged entity can reduce IT costs and enhance operational efficiency.
3. Talent and expertise synergies: The combined talent pool can drive innovation, such as developing new products or improving management practices.
4. Risk management enhancements: Risk management enhancements are another form of hidden synergy. By leveraging combined expertise and data, the merged entity can develop more sophisticated risk models, improving risk identification and mitigation.
5. Regulatory advantages: Streamlining compliance across jurisdictions can yield savings.
To capture hidden synergies, banks need to conduct proactive integration planning. That includes assessing operations post-deal to identify synergies using performance metrics. As to the vendors, don’t be shy, engage in negotiations and use market intelligence to secure vendor concessions. If you don’t have the knowledge, buy it.
Keep in mind, all deals face risks such as overestimating benefits or integration delays. When I look at the research, 50-90% of M&A deals fail to achieve expected value. To mitigate missed estimation, use market benchmarks for realistic estimates, make sure everyone has the same shared vision, and avoid a rushed consolidation. I have witnessed premature system integration cause over 10% customer churn.
Hidden synergies, from vendor savings to talent-driven innovation, are critical for bank M&A success. As our industry consolidates amid technological and regulatory challenges, these opportunities enable banks to exceed traditional synergy goals and gain competitive edges. By adopting robust due diligence, dynamic negotiations, and technology-driven insights, banks can unlock transformative value, distinguishing leaders in a competitive market.
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