In this expanded “2024 Mid-Year Review” edition of The M&A Monitor, we examine the full spectrum of bank M&A activity through the first half of 2024 (“1H 2024”) including transaction activity; pricing and valuation trends; deal drivers; geographic nuances; and best practices.
Bank M&A was sluggish in 2023 largely due to two particular variables: first, the ripple effects of the sharp increase in interest rates in recent years, particularly the onset of bond losses and adjustments to M&A “deal math” required by purchase accounting created a bid-ask spread between buyers and sellers; second, a sharp decline in bank stock prices – initially triggered by regional bank failures but now fueled by margin compression and flattening earnings – is exacerbating this bid-ask spread.
More recently, however, M&A discussions are decidedly freshening and the pace of deal announcements has increased, including several relatively large and/or otherwise noteworthy transactions. Indeed, in 1H 2024, the number of bank M&A transactions was nearly 25% higher than in 1H 2023 while the aggregate dollar value of such transactions increased nearly ten-fold over the same period. Looking ahead, the banking industry appears to be on the brink of a period of substantial M&A activity as the underlying forces driving consolidation over time all still largely hold and have become even more stout in recent years. Deal discussions will especially gain momentum as the FOMC’s easing intentions come into focus, as clarity on the economic outlook emerges, and if and as the ongoing recovery in bank stocks – up ~20-25% over the past month or so holds and/or gathers momentum.
Accordingly, this is a particularly apt time to re-calibrate your bank’s strategic plans whether as a potential seller, a would-be acquirer, a prospective merger partner, or in remaining staunchly independent. Particularly for those considering a sale at some point, an informed update on market conditions, valuation, and deal preparation and best practices would likely prove beneficial, especially as a bottleneck of sellers appears to be building, a surge that would be beneficial to get ahead of, if and as feasible.
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