Merger activity in the banking industry freshened in March while, more broadly, dealmaking is up substantially on a quarterly basis: the number of whole-bank mergers in Q1 2022 was almost 50% higher than the count in Q1 2021. As narrated often in this space, the quest for – or absence of – operating scale as a means of offsetting stiff headwinds remains a key driver of bank M&A activity.
In terms of pricing, median deal valuations were relatively stable in March: both the median price-to-tangible book and price-to-earnings (LTM) – 1.47x and 15.4x, respectively – mirrored year-to-date medians which, themselves, are largely similar to the full-year medians seen in 2021. In other words, pricing levels have been relatively stable.
Geographically, the long-term arc of bank consolidation continues to be a nationwide phenomenon. To be sure, a map of those banks agreeing to sell in March 2022 spans from Massachusetts to Arizona. The Midwest featured prominently in March as half of sellers hailed from this region. While this is reflective of several trends, the primary culprit is simple math: almost half of U.S. banks are chartered in the broader Midwest.
Recent chatter out of DC from the legislative and regulatory/executive branches is casting a brighter spotlight on the regulatory review process for bank mergers. Headlines addressing the same have prompted clients to inquire about the impact this has had – or might have – on the timing of the regulatory approval process for a potential M&A transaction. We do not anticipate much, if any, impact on community bank M&A transactions as the political chatter is focused on those institutions with assets above $100 billion. To wit, the median duration between transaction execution to transaction closing for all transactions closed thus far in 2022 is approximately 5 months, not materially different from prior years.
Finally, Olsen Palmer remains one of the top 3 community bank M&A advisors nationwide based on the number of whole-bank M&A transactions we have advised upon across the U.S. over the past three years, according to S&P Global.
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