The strategic justification for mergers typically takes one of two forms - either to consolidate presence in an existing market or to enter a new market. Consolidation within an existing market is typically expected to achieve greater efficiency through significant consolidation of operations. Mergers to enter new markets provide fewer opportunities to achieve these efficiencies.
Not uncommonly, a consolidated bank, particularly when entering a new market, does not achieve the cost saving or efficiency gains initially expected. As a result, some mergers actually increase operational or reputational risk of the consolidated institution.