While the fall season has brought change to clocks and leaves, the bank M&A marketplace remains unchanged. Almost 200 whole-bank M&A transactions have been entered into over the last twelve months, effectively twice as many as in calendar year 2020. Indeed, the aggregate bank M&A deal value in 2021 through just October has already reached the highest annual level in at least 15 years.
The recovery in dealmaking that took root in the fall of 2020 sprouted in full through 2021 and, barring a cessation of the confluence of factors driving deal activity, appears to be accelerating into 2022. Indeed, anecdotal indications and formal earnings guidance alike suggest that net income in 2022 will be flat – or lower – relative to 2021, though ’21 numbers enjoyed the benefit of one-time earnings boosters (e.g., PPP, mortgage volume, reserve releases, etc.). Nonetheless, if past cycles are a guide, flat earnings trajectory may hasten the pace of M&A for would-be buyers and potential sellers alike.
Deal pricing proved stable in October as the median price-to-tangible book multiple of 1.55x was in-line with the prior month’s median and, indeed, almost identical to the full year-to-date median of 1.53x. As referenced in this space previously, for a variety of reasons, we see little catalyst for a material increase in deal pricing in the coming quarters (see above re: flattening earnings), especially as current pricing is largely identical to M&A valuations over the long-term: the median price-to-tangible book value for all transactions announced over the past 20 years is approximately 1.56x.
Finally, on October 1st, Mackinaw Valley Financial Services, Inc. was acquired by First Bancorp of Taylorville, Inc.; on October 8th, Landmark Community Bank was acquired by Simmons First National Corporation while on the same date Tri-State Bank merged with Liberty Bank and Trust Company; and on October 13th, BankFirst Capital Corporation agreed to acquire The Citizens Bank of Fayette (party advised by Olsen Palmer indicated in bold). Olsen Palmer remains a top 3 bank M&A advisory firm nationwide according to S&P Global, as ranked by the total number of whole-bank M&A transactions advised upon since 2019.
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