As in virtually all areas of life, COVID brought substantial change to banking and to bank M&A in 2020. Dealmaking declined precipitously in 2020 with only 112 whole-bank M&A transactions announced, the 2nd fewest number of annual transactions on record.
Deal pricing declined as well in 2020, though to a lesser extent: the median price-to-tangible book (P/TBV) in 2020 was just over 1.3x, 16% lower than in 2019. That said, deal pricing began a noticeable recovery in 2H 2020 and, more recently, in December 2020 which saw a median P/TBV of just under 1.5x. The rebound in deal pricing is being driven by a number of factors including more-benign credit results and the ongoing recovery in bank stock prices.
Looking ahead, the stage is now set for substantial bank M&A activity in 2021 and beyond. Stiffening headwinds – NIM compression, slowing economic growth, increased loan competition, excess balance sheet liquidity, etc. – are driving increased acquirer appetites, especially as credit conditions have been more benign than contemplated at the outset of COVID. Conversely, insufficient scale, looming political and regulatory changes, a desire for greater shareholder liquidity, general operating fatigue, and other idiosyncratic factors are collectively driving more banks to pursue a sale.
Finally, Olsen Palmer was ranked the #2 bank M&A advisor nationwide in 2020 while 5 of the top 10-ranked individual bank M&A advisers were Olsen Palmer professionals including the firm’s Managing Partner who was the #1 bank M&A adviser nationwide for the 2nd consecutive year based on the number of whole-bank M&A transactions advised upon in full-year 2020, all according to S&P Global.
Note: We are hosting a Webinar discussion of the Bank M&A landscape and outlook on Thursday, January 21st at 3pm ET. To attend the Webinar, register here or email rtran@olsenpalmer.com.
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