Bank M&A

Survey Results: Anatomy of a Successful Deal

How do bank leaders – executives and board
members – measure success after the close of an acquisition or merger? The
answer seems to come down to the reasons banks engage in M&A in the first

Most, at 68%, point to achieving expected cost savings and revenue synergies, according to Bank Director’s 2020 Bank M&A Survey, sponsored by Crowe LLP. Fifty-eight percent point to earnings per share accretion, and 56% expect profitability to improve. A little more than half (51%) say that retaining key personnel is a good measure of success.

Forty-four percent of survey respondents expect to acquire a bank in 2020. Yet, most (60%) expect to be opportunistic acquirers that will focus on organic growth. One-quarter aim to be active acquirers; 14% say M&A is unlikely in their future.

The survey, conducted in late August and
September 2019, includes the views of more than 200 independent directors, chief executive officers and other
senior executives of U.S. banks about acquisition and growth trends.

Compared to last year’s survey, banks are still seeking the same components in a target. Deposits remain highly prized; 67% say the target’s deposit base is highly important in their decision to pull the trigger on an acquisition. And deposits are fueling acquisition activity: 60% seek to acquire an attractive deposit base. More than half say that increasing earnings per share is a reason to acquire.

acquisition drivers remain much the same, the barriers to completing a deal
have shifted over the past five years. Bank leaders have frequently bemoaned high
price expectations on the part of the seller as a deal barrier in past surveys.
Those concerns have risen by nine percentage points from the 2015 Bank M&A
Survey, to 72%. Of even greater concern is the rising percentage of respondents
who say there is a lack of suitable targets in markets they are in or want to
enter: 56% express this concern, up 32 percentage points.

The old adage remains true: Banks aren’t bought. They’re sold.

Key Findings

  • Deal Pricing Trends. Despite concerns about high prices, 58% believe that the prices paid for targets in the banking industry are reasonable. Almost half anticipate that pricing will decrease in 2020; 37% predict that pricing will remain steady.
  • Fewer Deals Predicated. More than half say less than 200 bank transactions will be announced in 2020. Twenty percent believe there will be no more than 225. That will represent a continued decline in deals: 275 were completed in 2018; 222 were completed in 2019, through October 30, according to data from S&P Global Market Intelligence. 
  • Modest Confidence in Selling. More than half of respondents believe it would be easy to find a buyer for their bank at a price the board would consider. However, that represents a 14-point decrease from last year’s survey, and an increasing percentage – 27% versus 11% last year – believe it would not be easy to attract a buyer.
  • CECL Impact Not Yet Understood. Almost 32% have not considered the impact of the current expected credit loss model on acquired loans.
  • Heightened Due Diligence. Almost half of respondents who have considered the impact of CECL say due diligence on targets has been heightened. Forty-three percent say there is a greater focus on data quality for acquisition targets; 43% are more sensitive to price.
  • Economic Expectations Dampened. While more than half expect the U.S. economy to experience modest growth, that represents an almost 20-point decrease from the survey a year ago. And no bank leader predicts significant growth for the U.S. economy, compared to 14% last year. Meanwhile, more believe the U.S. economy will remain flat (21% in the 2020 survey, versus 3% last year) or even experience a downturn (22% this year, compared to 7% a year ago).

To view the full results of the survey, click here.


Emily McCormick

Vice President of Editorial & Research

Emily McCormick is Vice President of Editorial & Research for Bank Director. Emily oversees research projects, from in-depth reports to Bank Director’s annual surveys on M&A, risk, compensation, governance and technology. She also manages content for the Bank Services Program. In addition to regularly speaking and moderating discussions at Bank Director’s in-person and virtual events, Emily regularly writes and edits for Bank Director magazine and She started her career in the circulation department at the Knoxville News-Sentinel, and graduated summa cum laude from The University of Tennessee with a bachelor’s degree in Spanish and International Business.