M&T Bank’s CFO Talks Acquisition Strategy

Darren King, the executive vice president and chief financial officer of $150.6 billion M&T Bank Corp., jokingly calls himself the baby of the M&A team.

He’s only done 14 out of 25 deals at the Buffalo, New York-based bank. Although most large bank executive teams have a good deal of experience with acquisitions, M&T’s is unique. King was part of the team that worked for the late Bob Wilmers, a CEO renowned for his deal-making acumen and penchant for buying companies at a discount. Under Wilmers, M&T bought Wilmington Trust at a 46% discount to market value in 2011. The thrift Hudson City Bancorp inked a deal to sell to M&T in 2012 for $3.7 billion in 2012, or 80% of tangible book value. Although perhaps best known as the deal that took regulators three years to approve, Hudson City was squarely in the vein of discount deal-making.

The latest deal under Chairman and CEO René Jones is a bit different. In February, M&T announced an all-stock acquisition of Bridgeport, Connecticut-based People’s United Financial for $7.6 billion, based on Feb. 19 closing prices. That resulted in a price to tangible book value of 166.5%, according to S&P Global Market Intelligence.

In May, I conferenced into a video call with King to talk M&A strategy for a Bank Director story in the third quarter 2021 magazine. Below is an edited transcript.

BD: Is this transaction different from past deals, in that sense that it’s a departure for M&T strategy?
DK: I wouldn’t call it a departure from our strategy.

As I said, that’s been our recent history that everyone remembers. But if you go back through time, before I got to the bank, we bought Keystone. We bought Premier right after. [Keystone Financial was based in Harrisburg, Pennsylvania, and Premier National Bancorp was based in Lagrangeville, New York. Both deals were announced in 2000.] We bought branches from Citibank; we bought branches from Chase.

Each deal is evaluated on its own merits. What are the strategic benefits and what are the merits of this particular deal? If there’s a willing seller, which is really what it takes to consummate a merger, we try as hard as we can to understand what strategic rationale, and what financial benefit would there be, to the combined shareholder base of a partnership.

BD: What have you learned from your experience?
DK: So much of the value [in a deal] lies in the customer base that you’re acquiring, and the communities that you’re entering. You have to understand them in a level of detail that you make sure you don’t put that at risk, because that’s the whole value of the transaction.

BD: Right, and detail-oriented people do well in your position?
DK: Yes, they do.

BD: Why is size and scale so important now?
DK: Well, I think others would place more emphasis on absolute scale than we would.

That’s been successful for us. We view local scale as more important than absolute scale. We try to be No. 1, 2, or 3 for branches, customers and deposits in the geographies in which we operate.

The benefit of having scale in a market is when you spend dollars on marketing, the bigger your share, the better leverage you get out of that spend. When you have management in that geography and they’re spending time in the communities with customers, they’re on boards, you get better leverage out of that management team. Even, to a certain extent, from a pricing perspective. If you become the hometown bank, and you have the largest share of customers and their operating accounts, you get a first and last look at any additional piece of business.

As I mentioned, we think we’ve got the wherewithal to make the technology investments that we need to be competitive. We start by looking at our customers and understanding their needs and problems, and then we try and solve them and work backwards, rather than just spend a certain amount of money.