Bank M&A activity rebounded sharply in August 2023, fulfilling the leading indicators of a broader intensification of deal discussions discussed in this space last month and symbolically foreshadowed by two appreciably-sized transactions announced in late July. Specifically, 17 whole-bank M&A transactions were announced in August, almost double the monthly average deal count witnessed over the rest of 2023.
More broadly, this sharp uptick in announced deals lends greater conviction to the outlook that the stage is set for a period of elevated bank M&A activity over the coming quarters and years as the structural forces driving consolidation over the past decade or more remain stubbornly in place and, in fact, are being further fueled by the headwinds currently buffeting the banking industry. While deal count will likely evidence fits-and-starts on a monthly basis, over a longer arc, appreciable deal activity is anticipated especially if and as bank stock valuations (aka, acquisition currencies) stabilize over time.
On valuations, as previously discussed in this space, moderated growth trajectories and compressing margins having softened earnings projections and, by extension, tempered franchise values. This phenomenon is reflected in median transaction multiples which are off ~10-15% in 2023 relative to 2022. That said, the 2023 median is skewed by the disproportionate absence of pricing details from non-public deals and by the increasing prominence of low/no-premium merger-of-equals. In fact, in many already-announced private deals as well as in active, in-process transactions, we are seeing pricing that is more consistent with 2022 levels, especially in transactions involving sellers on the lower end of the asset size spectrum.
Finally, in unrelated transactions, on August 1st Wyoming Bank & Trust agreed to be acquired by Saville Capital Group; on August 28th OneSouth Bank agreed to be acquired by Five Star CU; and on August 31st Algonquin State Bank agreed to be acquired by Michigan State University FCU (party advised by Olsen Palmer indicated in bold).
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