Bridging the Disconnect Between Buyers and Sellers

After several subdued years, bank M&A activity is gaining momentum, fueled by improved earnings, stabilizing credit markets and renewed strategic interest on the part of bank boards. Responses to Bank Director’s 2026 Bank M&A Survey of board members and senior executives confirm this resurgence.

At the same time, however, the survey reveals some fundamental disconnects between buyers’ and sellers’ perspectives, particularly in terms of what buyers are looking for in an M&A target and what sellers believe they should do to make their bank more attractive. For boards on either side of a potential deal, understanding — and narrowing — this gap in perceptions can be the key to a successful transaction.

Diverging Viewpoints
A certain amount of disparity between buyers’ and sellers’ perspectives is inevitable in any transaction, of course. The Bank Director survey responses illustrate this fundamental truth, but they also suggest some ways in which these inherent differences can be narrowed.

For example, when buyers were asked to name the top five attributes of a potential acquisition target, an attractive deposit base was most often cited (named by 70% of respondents). Other leading attributes included potential efficiency gains and cost-saving opportunities (cited by 50% of buyers), opportunities for geographic expansion (45%) and locations in growing markets (40%).

On the other hand, when sellers were asked what changes they could make to attract a better price, the disparity in viewpoints became obvious. Sellers’ leading answer was to grow business lines that generate fee income (cited by 44% of sellers). Reducing noncore, high-cost deposits was second-most cited (29%), with sizable numbers also citing the successful completion of various cost-reduction initiatives.

In other words, buyers are looking for a solid deposit base in an attractive market, good credit culture and opportunities to achieve synergies and improve efficiency. But sellers are focusing on increasing noninterest income and demonstrating improved profitability through lower costs.

Ironically, sellers’ efforts in this area can leave buyers with fewer post-close opportunities to improve efficiency, synergy and scale. A heavy emphasis on improvements that already have been achieved can reduce the multiple a buyer is willing to pay. Considered this way, it is not surprising that a large majority of potential buyers (74%) said the leading barrier to successful transactions was their targets’ pricing expectations.

Bridging the Gap: How Buyers Can Adjust
In addition to the disparity in pricing expectations, an almost equally important barrier cited by potential buyers was simply a lack of suitable targets — a challenge named by 71% of survey respondents. Overcoming this barrier can require some adjustments on the part of buyers.

For example, buyers might need to reassess how they define an “attractive deposit base,” going beyond the headline interest rate to understand the actual costs and potential efficiencies they could achieve. If economic or demographic trends support it, they also might consider expanding their geographic targets.

Narrowly defined screening criteria also could contribute to the perception of a lack of targets. To counter this, buyers might want to reassess how closely their M&A filters align with their broader strategic goals.

When evaluating targets’ lending portfolios, rather than thinking in terms of broad categories such as manufacturing, strategic buyers might look for targets with strong portfolios in specific sectors.

Above all, buyers might want to reevaluate opportunities for post-acquisition optimization in order to identify more potential targets.

Bridging the Gap: How Sellers Can Adapt
From a seller’s perspective, banks that command premium multiples in M&A transactions typically do so because they offer something distinctive — not because they simply improved performance. Profitability is an important metric, but sellers looking to boost their bank’s perceived value to a potential acquirer would be wise to broaden their focus to show why they are different or demonstrate the unique capabilities they offer.

This could mean emphasizing why a target bank’s deposits are low-cost and stable, highlighting the bank’s strength in specific loan categories or markets that align with the buyer’s stated strategy or showcasing the bank’s disciplined credit culture with limited adverse exposure.

In short, sellers looking to increase their bank’s attractiveness should begin by learning to think like the other side of the table. What’s more, the same principle applies to buyers. Boards that step back and evaluate their institutions through the other party’s lens are better positioned to identify realistic opportunities, set achievable valuation expectations and move decisively when the right deal emerges.