The bank M&A marketplace gathered steam in March, continuing the arc of the recovery in dealmaking that began in the 2nd half of 2020 and has gained momentum since. Deal pricing also freshened in March: the median price-to-tangible book value multiple in March was 1.52x, a 25% increase over the February median of 1.22x. The year-to-date median is 1.48x, a notable recovery from the 2020 median of 1.34x and not much below the 2019 median of 1.58x.
That said, while hope springs eternal, unfortunately we see little catalyst for pricing to increase further, especially given profitability headwinds. If recent history is a guide then M&A multiples may not have much of a catalyst to appreciate further, at least until and unless the market multiples of publicly traded banks expand from current levels.
March also saw the largest announced acquisition of a bank by a credit union, VyStar Credit Union’s agreement to acquire $1.6 billion-asset Heritage Southeast Bancorporation. While a sale to a credit union may prove attractive for a selling bank’s shareholders and customers, there are obvious tax, competitive, and cultural challenges that need to be satisfactorily addressed.
Speaking of taxes, recent legislative discussions out of DC suggest an increase in capital gains tax rates may be looming. Prospective sellers would do well to understand the implications of such a change in capital gains tax rates and, if feasible, pre-empt such an increase.
Finally, on March 16th, Town-Country National Bank agreed to be acquired by the parent company of United Bank for $28.5 million in cash while on March 31st, Durand Bancorp Inc. agreed to be acquired by High Point Financial Services Inc. (party advised by Olsen Palmer indicated in bold).
For assistance with answering questions or if we can provide additional information, please feel free to contact us.
Contact: info@olsenpalmer.com