M&A Report
|
Executive Summary
This article is part of Bain's 2026 M&A Report. Several forces that held back banking mergers and acquisitions in recent years have eased of late. Regulators in the US and elsewhere are more favorable, monetary policy is more supportive, and the need for modernization to support continued growth is more acute. The confluence of these trends reopens the deal environment to strategic growth plays rather than defensive plays. In sheer volume, M&A is solidly back. After the number of banking deals rebounded in 2024, it surged further in 2025 (see Figure 1). The deal playbook, however, has evolved. Acquirers will need to step up their diligence capabilities and develop a coherent, durable value thesis in order to realize strong returns.
Figure 1
Note: 2025 deal data annualized based activity through October 2025 Sources: Dealogic; Bain analysisAnd the nature of that value thesis is changing. Many past deals relied, in simplest terms, on a logic of either scale or scope. One path built size, efficiency, and market share through leadership economics in businesses, local markets, and specialized verticals. The other path sought fintechs or other companies to gain access to new technologies, capabilities, or talent. Now, leading bank acquirers are exploring a new frontier in which scale and scope strategies intertwine to form a double helix of efficiency and innovation. Winning combinations blend scale economics with innovation in products, business processes, and customer experience, creating institutions that are both cheaper to run and set up for growth. New Bain & Company analysis finds that 2025 bank acquisitions with substantive scale and scope components saw roughly 30% better gains in valuation than deals that were primarily only scale or scope. As Fifth Third CEO Timothy Spence noted about the bank’s recent merger with Comerica, “the outcome must be a company that is better, not just bigger.” A successful deal “has to be strength pairing strength or strength pairing opportunity.” How scale still matters for efficiencyTo be sure, scale remains a winning logic in a capital- and compliance-heavy industry such as banking. Here, North American banks have a long way to go, lagging peers in European markets by more than 14 percentage points on average in their cost-to-income ratios. Recent US acquisitions such as Huntington–Cadence aim for cost efficiency in operations, infrastructure, and compliance; balance sheet strength; and distribution leverage. But there are significant risks with poorly executed scale deals. Integration can drag on and hurt organizational cultures, as occurred after the 2019 merger of BB&T and SunTrust that produced Truist. Shifting customers onto a different digital system, rebranding branches, and sorting out where and how to cut costs took longer than anticipated. This contributed to significant customer-service problems, including delayed access to cash, issues with debit cards, and long wait times for service agents. Or the acquirer may fail to realize the hoped-for synergies. For instance, two banks that were subscale in their respective US local markets merged and got larger overall, but their footprints did not overlap much. As a result, the merger did not bring better scale in local markets, and the merged bank’s relative market share declined. Scale can help achieve greater efficiency when banks execute their synergies with precision and actively mitigate the key risks. CaixaBank in Spain, for instance, achieved cost savings synergies that were higher than initially planned from its acquisition of Bankia. After much strategic preparation, the combined banks accomplished a full technology integration over the course of one weekend, reducing the risk of integration drag. CaixaBank also negotiated a nationwide union agreement that cut 6,400 roles, but without forced layoffs. How scope can accelerate capabilities and modernizationMost banks use scope M&A to move into adjacent offerings or capabilities, such as embedded payments solutions, artificial intelligence, or data analytics. Often, scope deals are a means to accelerate technology modernization instead of building it in-house. Succeeding with such deals requires strategic clarity and modern diligence and integration playbooks. JPMorgan Chase’s acquisition of payments company WePay exemplifies strategic clarity: It bought a modern payments gateway to penetrate and serve small businesses. Modern diligence was evident in the bank’s scrutiny of WePay’s robust application programming interface (API) and certification capabilities for software vendors. And the integration playbook took shape by folding WePay into JPMorgan Payments’ embedded finance offerings. A new frontier in which scale meets scopeA few recent deals illustrate how combining scale and scope can create even more value than either alone. Consider Capital One’s acquisition of Discover, which combines banking and credit card scale with the addition of a major payments network that processes transactions globally. The merger gives Capital One direct ownership of a payments network, enabling it to capture full value across the payments stack. It also unlocks opportunities to develop broader connected-commerce and embedded-finance solutions that integrate banking, data, and merchant ecosystems. In Europe, Societe Generale subsidiary ALD acquired LeasePlan to form a company now known as Avyens. The acquisition brought scale in the form of global multibrand, multichannel leasing. Complementary capabilities came with LeasePlan’s telematics and connected fleet products and platform. Many other banks will increasingly combine scale and scope in their pipelines. For one thing, more regulators are receptive to such strategies as a way to reduce vulnerabilities in a fragmented financial landscape. Research by the ECB and FDIC suggests that digital-banking models’ lower profitability and higher level of uninsured deposits pose risks to financial stability; that pushes US and European banks toward M&A focused on scale and scope to offset costs and strengthen competitiveness. For the banks themselves, empirical evidence points to several benefits. For instance, one academic study in the Borsa Istanbul Review found that fintech and bank mergers and acquisitions have a significant positive impact on the operating performance, liquidity, and financial leverage of the acquirer. The Bank of International Settlements notes that despite advances in technology, it’s costly in time and effort for consumers to search for and assemble their relevant financial services. In turn, this dynamic encourages a rebundling of services and confers advantages to large multiproduct providers. Quality of diligence makes or breaks the dealRegardless of the deal logic, the complexity of banking today demands excellence in diligence, along with a contemporary value thesis. Indeed, mediocre diligence is one key reason why traditional playbooks fail. They often miss basic risks around digital integrity, such as a target’s fake customer base. Or they go heavy on accounting issues but too light on strategic questions. Further, legacy technology teams involved in diligence may not be equipped to assess API-driven or modern cloud-native models. Modern diligence, by contrast, goes beyond process checks to under-the-hood scrutiny of technologies and go-to-market motions, making sure they are resilient. Winning in M&A isn’t about buying the most or biggest targets but rather in the smartest choice of targets and speed in integration. That’s essential for banks to create leadership economics and adapt to the next turn in their respective markets. Read our 2026 M&A ReportOverviewIndustry Views |