In the recent webinar “Building a Successful M&A Strategy,” co-hosted with Olsen/Palmer, we explored the current mergers and acquisitions (M&A) landscape and its impact on the banking industry. The discussion highlighted a compelling shift in the advantages of smaller banks to capture new growth opportunities. Over the past three decades, we’ve seen the average size of buyers steadily decrease while the average size of sellers has steadily increased.
What is driving the change in M&A opportunity for banks?
Interestingly, the regulatory environment not only is making it more difficult for banks to do business, it is also creating a greater opportunity for smaller banks to seize market share. Community lenders are having a positive impact on regulators with their consistent message of “We’re not Wall Street.” This message is shifting the growth opportunities in the favor of those banks with less than $10 billion in assets.
“The environment is only getting worse for the biggest banks. The community guys are going to get the biggest benefit of policy changes in 2015.”
(Isaac Boltanksy, policy analyst, Compass Point Research & Trading LLC)
CNBC echoes this thinking in an article from late 2014. Christopher Whalen, senior managing director at Kroll Bond Rating Agency, reasons, “The smaller banks have a lot more capital per dollar of assets than the big guys do. They also tend to be more effective at managing credit risks. The execution, the quality of services – all those factors come into play for the smaller banks, whereas the big guys can’t get it done.”
Bottom line, the M&A market is the most favorable it’s ever been for smaller banks. There’s never been a better time to act on a well-honed vision and growth strategy. Still, acquisitions bring a considerable amount of risk. Those institutions that take the time to plan and prepare carefully will be best positioned to win. The question is whether your institution has reviewed every key consideration for an M&A transaction, so you can be certain you are poised and ready to seize the opportunity.
Opportunity is knocking. Have you considered every financial, operational and institutional consequence? Call on our banking industry focused experts to guide you through a successful M&A.
Graph source: SNL Financial, Olsen Palmer analysis