Without question, bank M&A activity is back: the number of deals announced in 2021 was nearly twice that of 2020 while the aggregate value of deals in 2021 – nearly $80 billion – marked a 15-year high. Deal pricing similarly rebounded off the COVID-induced trough as valuations are now largely back to pre-COVID levels: the median price-to-tangible book multiple in 2021 was 1.54x, just below the pre-COVID median of 1.58x seen in full-year 2019.
Looking ahead, it appears that an extended period of consolidation is upon us. Stiff headwinds – including NIM compression, slowing economic growth, excess balance sheet liquidity, increased competition from banks and non-banks alike, looming inflation, etc. – are driving elevated acquirer appetites. This acquisition demand is benefitting from conditions in the capital markets that are particularly cooperative for funding potential acquisitions. Conversely, on the seller side, insufficient scale, political and regulatory changes, increased compliance and technology costs, a desire for greater shareholder liquidity, general operating fatigue, and other idiosyncratic factors are individually and collectively driving more banks to pursue a sale, essentially ‘taking chips off the table’.
Finally, Olsen Palmer is pleased to report that we ended 2021 as one of the top 3 bank M&A advisors across the entire U.S. according to S&P Global, as ranked by the total number of whole-bank M&A transactions advised upon over the last three years.
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