Dealmaking in the banking industry remained languid through May. M&A was already tempered before the failures of Silicon Valley Bank et al. (“SVB”), largely due to the advent of a bid-ask spread created by AOCI. SVB and the resulting fallout further slowed activity as bankers prioritized firming up liquidity plans and assuaging depositor, investor, and regulator concerns. The SVB-induced decline in bank stocks - initially down ~30-40% with ~20% since re-gained - threw a further wrench in the works.
However, more recently, discussions have been gathering momentum. As of press time, June’s month-to-date deal count has already surpassed May’s while our proprietary pipeline confirms M&A discussions have started to tick up meaningfully, especially as heightened funding and margin challenges are increasingly highlighting the relevance of operating scale. Notably, on most active sell-side engagements, we are seeing a critical mass of ready-and-willing would-be acquirers. Buyer interest on active sell-side engagements is generally as high as it was pre-SVB. In fact, unsurprisingly, those potential sellers with attractive deposit bases are seeing heightened interest from prospective buyers.
In terms of pricing, data from both actual multiples reported in May transactions (albeit from a limited sample size) and proprietary in-process transactions indicate that current market pricing is little changed relative to pre-SVB valuations.
Also of note, First Horizon and TD Bank announced on May 4th the mutual termination of their $13.4 billion pending merger, first entered into on February 28, 2022. The termination, attributed to the lack of regulatory approval of the merger and insufficient visibility on the timeline for securing such approval, is not reflective of the state of regulatory approvals for community bank M&A. Rather, for recent community bank M&A transactions, the regulatory approval process remains relatively straightforward as the average duration between the date of the merger agreement and the date of closing remains largely unchanged at approximately 5 months.
For assistance with answering questions or if we can provide additional information, please feel free to contact us.
Contact: info@olsenpalmer.com