Bank M&A activity continued to thaw in August. In fact, while dealmaking activity remains decidedly below pre-COVID levels, since bottoming out in May monthly deal activity has been increasing in each successive month.
Pricing results in August were arguably even more positive: the median price-to-tangible book value was approximately 1.4x. That said, two cautionary notes are worth sounding: 1) there were few data points in August (only 8 transactions announced, only 5 of which revealed pricing) and 2) pricing was widely-dispersed in August with one deal priced as low as ~0.9x tangible book value and another at ~1.1x tangible book value.
From here, any meaningful improvement in deal pricing will likely hinge, in large part, on a recovery in bank stock valuations. Strikingly, more than ½ of bank stocks are currently trading below 1.0x tangible book value.
In light of ongoing and potential shifts in the banking industry, for both practical planning purposes and as good fiduciary ‘housekeeping’, we recommend bankers and their Boards update their internal evaluation of various strategic options including but not necessarily limited to: acquisitions; mergers/mergers-of-equals; a sale of the bank; branch acquisition(s) or sale(s); share repurchases; and capital sources and options.
Finally, on August 20th, Escambia County Bank agreed to be acquired by AmeriFirst Bank in a cash-and-special dividend transaction. Olsen Palmer LLC served as exclusive financial advisor to Escambia County Bank.
Olsen Palmer is the #1 sell-side bank M&A advisor nationwide – and the #2 overall bank M&A advisor – based on the number of whole-bank M&A transactions advised on in 2020 year-to-date, according to S&P Global.
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