A Witness to M&A History

When Bank Director hosted its first Acquire or Be Acquired conference in 1994, there were 12,604 banks and thrifts in the U.S., according to the Federal Deposit Insurance Corp. As of the third quarter of 2017, which is the FDIC’s most recent tally, there were 5,737 banks and thrifts—a 54.5 percent decrease. That is a stunning reduction in the number of depository institutions over this period of nearly two and a half decades, and the Acquire or Be Acquired conference has been a witness—and a chronicler—of it all.

This year’s event will kick off on Sunday, January 28 at the Arizona Biltmore Resort in Phoenix. By my count, I have attended 18 of these conferences, and the things we have discussed while we were there have changed over time and are always a reflection of the times. In the early 2000s, when the U.S. economy was strong and big banks were still in the game, we focused on the dealmakers who were building banking empires and taught the fundamentals of putting together a successful M&A transaction. During the depths of the financial crisis, when there wasn’t much M&A activity going on as many banks were more focused on shoring up their shaky balance sheets, and some were taking money from the Treasury Department’s Troubled Asset Relief Program, we talked a lot about strategies for raising capital. And since the few transactions during that period tended to be government-assisted deals with the FDIC, we offered advice on how to do those successfully.

More recently, as the industry’s financial health has returned, capital levels have improved and there are no longer many broken banks to buy, we have focused on the mechanics of buying and selling healthy banks. For many banks today, M&A has once again become the centerpiece of their strategic growth plans. However, we have also expanded the conference’s focus in recent years by adding general sessions and workshops on a broad array of topics including financial technology, lending, data, interest rates and deposits. The decision to buy or sell a bank is rarely made on the strength of the deal price alone, but is driven by these and other critical business considerations. We have tried to account for that broader perspective.

An issue that has been an underpinning to Acquire or Be Acquired from its very beginning has been the banking industry’s consolidation, a trend that dates back to at least the early 1980s. Last year there were 261 healthy bank acquisitions, according to S&P Global Market Intelligence, compared to 240 in 2016 and 278 in 2015. The outlook for 2018 is good, based on the rise in bank stock valuations following the enactment of a tax reform law that drastically cuts the corporate tax rate. With a stronger currency in the form of a higher stock price, acquirers should have an easier time putting together deals that are attractive to their own shareholders. It’s a fool’s game to predict the number of transactions in any given year (and a game that I have played, foolishly and without much success, in years past), but I would expect to see deal volume this year somewhere in that 240 to 278 range, which has come to represent a normalized bank M&A market in recent years.

Whatever the deal count in 2018 turns out to be, the banking industry’s consolidation rolls on, and the Acquire or Be Acquired conference will continue to be a witness to history.