Dealmaking in the banking industry tempered in 2022 relative to the prior year. The year began with a flurry of activity as January saw nearly 20 whole-bank M&A deals announced, continuing the brisk pace seen in 2021. However, deal activity began to moderate as a number of unknowns emerged including a war in Ukraine, hastening inflation, a meaningful shift in interest rates, macroeconomic uncertainty, and a pullback in equity valuations, bank and non-bank alike. Dealmaking was further complicated by the emergence of unrealized bond losses and the need by dealmakers to adapt accordingly. That said, while deal activity moderated in 2022 relative to 2021, the bank M&A marketplace otherwise remained alive and well as 165 whole-bank M&A transactions were announced over the course of the year. Now with the benefit of hindsight, the moderation in 2022 looks much less like an extinguishment of consolidation and much more like a deferral of deal activity into future quarters, as the underlying forces driving bank consolidation in recent years (if not decades) all largely still hold and, in fact, may now be even more stout.
Indeed, looking ahead, the banking industry appears to be poised for an extended period of consolidation. Stiff headwinds – NIM compression, slowing economic growth, tightening balance sheet liquidity, increased competition from both banks and non-banks alike, resilient inflation, regulatory obligations, etc. – are driving both elevated interest in selling (i.e., to avoid these challenges) and elevated acquirer appetites (i.e., to at least partially offset these challenges by achieving greater operating scale).
For assistance with answering questions or if we can provide additional information, please feel free to contact us.
Contact: info@olsenpalmer.com