Insights From The Arc: The M&A Edition

Welcome to our fifth edition of The Arc Newsletter. On the heels of much convergence and divergence, mergers and acquisitions continued to ramp up across many industries.

The Strategic Convergence: M&A, Data Modernization, and AI in Banking

Three forces are reshaping the market: a resurgence in deal activity, the drive for economies of scale, and the imperative for AI-driven core modernization. The global M&A market is experiencing renewed momentum with reports that private equity represents a significant catalyst and financial investors have dry powder reaching extraordinary levels estimated at more than $2 trillion globally, while average exit hold times reached an all-time high of 8.5 years in 2024.

Banking Sector Activity

Banking M&A has accelerated notably. According to S&P Global Market Intelligence data, bank M&A announcements in 2025 reached 181 deals, their highest level since 2021, with 105 deals in the second half of 2025 compared to 63 in the latter half of 2024. Source: Banking Dive.

J.P. Morgan's research provides strategic context. Their 2026 outlook indicates that global dealmaking in 2025 saw strategic M&A, selective IPOs, sector convergence and innovative financing, with momentum expected to accelerate across markets into 2026. Cross-border activity is expected to increase, led by convergence in AI, climate and health.

Core banking modernization represents both an urgent necessity and a significant risk. IDC research underscores operational concerns: 32% of banking CIOs mentioned downtime risk as a top concern to the extent that it may hamper the transformation program.

IDC projects a strategic shift: 40 percent of global banks will be pursuing sidecar core strategies by 2026, and this percentage will increase to 70–80% by 2028 as banks gain experience with hybrid approaches and develop confidence in incremental modernization strategies

Research shows customer records are often duplicated, incomplete, or trapped in legacy databases, with day-one readiness delayed as data cleanup, reconciliation, and system access issues pile up. Technology integration is seen as a significant challenge in acquisitions. Bain & Company documents the customer impact: One recent merger saw the combined bank's Net Promoter Score drop by 55% in a single quarter as customers experienced delays in accessing accounts, issues with online banking, and poor support response times.

American Banker's research confirms prioritization: More than 80% of bankers surveyed said they increased their tech budgets to invest more in security, data analytics and AI. Banking M&A data complexity arises from merging disparate legacy systems, incompatible data models, and strict regulatory requirements, with nearly 70% of deals facing integration hurdles.

While the overall number of transactions has normalized from earlier peaks, deal size and complexity, continue to rise, driven by strategic motivations rather than opportunistic expansion. Institutions are focusing on technology integration, scalable platforms, and AI-enabled analytics to achieve postmerger value realization faster than traditional cycles would allow. (Source: M&A Acceleration in Financial Services, Quantum Six et Al )

This image below highlights ArcOne’s OcularAI approach to data migration and quality assurance, emphasizing that clean, real-time data is critical for AI adoption and regulatory compliance.

The process is divided into two preparation phases: the first focuses on automated assessment, AI-powered cleansing, and data model transformation, while the second centers on incremental migration with rollback capabilities, real-time synchronization, and rigorous transaction verification.

By employing these strategies, including duplicate resolution and customer account validation, the system aims to achieve 99.9% data accuracy post-migration and zero customer-facing data errors.

This three-pillar framework addresses the sequential dependencies which identify as critical success factors.

Core modernization without standardization results in timeline overruns. Standardization without proper integration governance leads to project failure rates. Integration without modernized foundations is not future proofed for scale or customer satisfaction.

Unlocking the full potential of agentic AI requires more than plugging agents into existing workflows. It calls for reimagining those workflows from the ground up with agents at the core. This principle applies across all three pillars: modernization creates the technical foundation, preconfiguration establishes the operational patterns, and phased integration executes the transformation while maintaining business continuity.

The economic justification emerges from cumulative benefits. Pillar 1 can deliver 30-40% cost reduction. Pillar 2 enables 80% faster integration planning. Pillar 3 produces 20-60% productivity improvements.

Conference Spotlight

Are you attending Bank Director's AOBA in Phoenix? Meet us to discuss M&A readiness, integration strategy, data intelligence and AI systems. Reach out to Christopher Kenney or John Andersen or email insights@arcone.com

Learn more about ArcOne AI's ecosystem approach with Quantum Six DXC Technology IBM eXate TES Enterprise Solutions Download the Quantum Six M&A whitepaper here.

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Insights From The Arc Newsletter | Editor: Shaku Selvakumar

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About ArcOne AI : ArcOne AI helps businesses reimagine revenue management by enhancing profits and reducing operational inefficiencies. We integrate data-driven decision intelligence into enterprise products and financial operations for highly regulated industries such as banking and utilities. Our customers and partners include Fortune 500 companies in banking and utilities.

ArcOne AI is headquartered in Austin, Texas with offices in India and a presence through our partners in Europe and ME.

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