Banking dealmaking is returning – but the playbook is changing. After a rebound in 2024, banking M&A activity accelerated further in 2025, with momentum led by renewed midmarket activity (based on transaction database analyses).
What’s different this cycle is why banks are buying – and what “good” now looks like. The industry is moving away from purely defensive consolidation and toward modernization-led transactions, where banks seek to become simultaneously more efficient and more innovative.
At a glance
- Banking M&A has shifted from defensive reshuffling toward strategic growth and modernization.
- A growing share of acquirers are combining scale (efficiency, cost leverage) with scope (capabilities, technology, talent) to build “future-ready” banks.
- 2025 acquisitions that had meaningful elements of both scale and scope showed ~30% better valuation gains than deals driven primarily by only one logic.
- The differentiator is increasingly modern diligence – especially rigorous technical assessment and a clear value thesis, not just financial scrutiny.
What’s driving the new wave of banking M&A
Several headwinds that constrained bank M&A in recent years have eased, while the imperative to modernize has intensified – pushing deals back onto leadership agendas as a growth lever rather than a last resort.
In parallel, Europe is seeing a notable uptick in cross-border consolidation: reported EU cross-border bank M&A rose sharply in 2025 (e.g., Dealogic-based reporting cited ~€17bn vs ~€3.4bn the year prior), suggesting renewed confidence and a search for scale and competitive capability.
The new deal logic: a “double helix” of efficiency and innovation
Historically, many bank deals fit one of two narratives:
1) Scale deals – “bigger is cheaper”
Scale is still a powerful logic in a capital- and compliance-heavy industry. One analysis highlights a wide efficiency gap: North American banks lag European peers by more than ~14 percentage points on average in cost-to-income ratios.
But scale deals have well-known risks:
- Integration drag that erodes performance and culture
- Customer disruption during digital migration
- Synergies that don’t materialize when footprints don’t truly overlap
Implication: scale creates value only when synergy execution is precise and the customer experience is protected.
2) Scope deals – “faster capability-building”
Banks pursue scope deals to accelerate modernization – buying adjacent capabilities like embedded payments, AI, or data analytics rather than building them from scratch.
But scope deals require a different muscle:
- clear strategic intent (what capability, for whom, and why now)
- technical diligence that matches modern architectures (APIs, cloud-native patterns)
- an integration approach that preserves what made the target valuable
The frontier: combining scale and scope
The emerging model blends both: using scale economics to lower unit cost while using acquired capabilities to expand product relevance, improve processes, and upgrade customer experience.
This matters because it appears to correlate with stronger market outcomes: in 2025, deals with substantive scale-and-scope components saw ~30% better gains in valuation than primarily scale-only or scope-only deals.
Why “scale + scope” outperforms: the hidden economics
A combined strategy can unlock three reinforcing advantages:
- Cost takeout that funds reinvention. Scale synergies can create the financial headroom to modernize platforms and experience – turning cost efficiency into growth capacity.
- Control of more of the value chain. Some combinations create strategic control points (e.g., infrastructure layers, distribution, processing) that improve pricing power and resilience.
- A stronger competitive posture against fragmentation risks. Research referenced in sector commentary suggests digital-banking models may carry stability vulnerabilities (e.g., profitability pressures and uninsured deposit dynamics), increasing incentives for deals that improve durability through efficiency and capability upgrades.
Where most bank deals still fail: diligence that’s too financial and not technical enough
As banking becomes more software-defined, the “traditional” diligence playbook increasingly misses the risks that move value:
- Digital integrity risks (e.g., customer base quality, fraud exposure)
- Technology reality checks (API maturity, security posture, resilience, cloud architecture)
- Go-to-market fit (distribution leverage, underwriting or pricing logic, adoption path)
One consistent warning from the research: many teams over-index on accounting and compliance checklists while under-testing whether the target’s technology and operating model are truly scalable, resilient, and integrable.
What “modern diligence” looks like
The integration imperative: speed without self-inflicted damage.
- A clear, quantified value thesis (how value will be created, when, and through which levers)
- “Under-the-hood” technical diligence, not surface-level process reviews
As deals become more modernization-driven, integration must do two things at once:
- capture synergies with discipline
- protect customers during system and experience transitions
The cautionary evidence is clear: poorly managed migrations and re-platforming can degrade service and trust, turning integration into a value destroyer. On the flip side, the research points to cases where deep preparation enabled rapid technology integration (even compressed into a very short execution window), reducing prolonged disruption risk.
The practical lesson: Integration speed is not a vanity metric – it is a risk control and a customer retention strategy.
A board-ready checklist for 2026 banking M&A
- What is the deal’s primary modernization objective – and how does it link to growth?
- Is the thesis scale-only, scope-only, or deliberately combined – and why?
- Which valuation levers will prove the thesis (cost, revenue, risk, or platform optionality)?
- Have we done technical diligence deep enough to validate resilience and integrability?
- What are the top three integration risks to customers – and how are we mitigating them?
- What is the integration path that preserves the target’s strengths (talent, product velocity, architecture)?
- How will we measure value capture in the first 100 days and the first 12 months?
How Qienda would frame this as advisory work
In practice, banks win in this cycle by being excellent at three things:
- Value thesis design: translating “modernization” into a quantified plan (efficiency + growth + risk)
- Modern diligence: combining financial scrutiny with rigorous technical and commercial assessments
- Decision-grade integration governance: fast execution, clean accountability, and customer-protecting controls
