Bank merger activity rebounded somewhat in January as 10 transactions were announced over the course of the month, roughly twice as many as in recent months and, in fact, a 5-month high water mark. While overall dealmaking remains somewhat tepid, below the surface, the M&A marketplace is gathering appreciable momentum, due to three factors: 1) a clearing of the backlog of deals otherwise intended over the past ~24 months; 2) a mean reversion to customary annual transaction counts driven by perennial deal drivers (e.g., retirements/succession, shareholder liquidity, etc.); and 3) incremental transactions triggered by stiffening operating, regulatory, and economic conditions.
Given the outlook for materially greater deal activity ahead, bank directors and management teams would do well to understand the protracted timeline involved in a bank M&A transaction. Of note, the period between transaction ‘launch’ and a signable merger agreement can be anywhere between ~3 to 12 months (or longer) depending on the nature of discussions and the process utilized. From there, the period between signing a binding merger agreement and the subsequent closing is typically 4 to 6 months, though we have seen as short as 2 months and as long as 2+ years. The upshot is that a transaction can take anywhere from 9 months to 2 years (or longer) to get from start to closing, not to mention post-closing commitments that acquirers commonly require of the seller’s CEO and/or management. In short, transactions take time. Accordingly, as a best practice, we recommend thoroughly understanding the steps in the transaction sequence, the corresponding timelines, and recommended preparatory measures to be taken beforehand and along the way.
Finally, by way of recent Olsen Palmer transactions: on January 2nd, 22nd State Bank agreed to sell 5 branches to All In Credit Union; on January 16th, SunSouth Bank was acquired by All In Credit Union; and on January 31st, The Bank of Denver was acquired by MidWest One Financial Group (party advised by Olsen Palmer indicated in bold).
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