BRENTWOOD, TENN., Nov. 16, 2021 – Bank Director, the leading information resource for directors and officers of financial institutions nationwide, today released its 2022 Bank M&A Survey, sponsored by Crowe LLP. Findings indicate scale and technology are among the competitive pressures expected to drive deal activity in 2022.
“The survey results indicate that the digital acceleration experienced by the industry over the pandemic, combined with other factors, could pressure some banks to sell,” says Emily McCormick, vice president of research at Bank Director. “However, banks also feel optimistic about economic conditions and credit quality heading into 2022, despite telling us that many of their clients report business disruptions due to supply chain and labor issues.”
Findings in the 2022 Bank M&A Survey show that in an environment characterized by digital transformation, high competition for customers and talent, and continued low interest rates, merging two organizations may prove too compelling for some to pass up.
Almost half of survey respondents say their institution is likely to purchase another bank by the end of 2022 — a significant increase compared to the previous year, and more in line with the pre-pandemic environment. Institutions in southern and midwestern states exhibit a stronger appetite for M&A, with around a quarter believing they’re very likely to acquire another bank.
Given the usual pace of M&A, it’s unlikely that most of these prospective acquirers will find a willing target. But the same factors that spur acquirers to build scale also propel sellers: 42% of respondents to Bank Director’s 2022 Bank M&A Survey say that an inability to keep pace with the digital evolution could drive their bank to sell.
“Interest in and relevance of mergers of equals (MOEs) increased in 2021, a development that is borne out in the survey responses,” says Rick Childs, partner, advisory services at Crowe. “Many banks are looking to spread digitization costs across a larger asset base, and they are increasingly open to either MOEs or strategic mergers and acquisitions.”
The Right Price
Price remains a key barrier to deals, as noted by 73% of respondents. The plurality of prospective buyers (43%) indicate they’re willing to pay up to 1.5 times tangible book value for a target. Nineteen percent say they’d pay up to 1.75 times book; 9% would pay more.
Many Open to MOEs
Almost half of respondents say they’d consider a merger of equals or similar strategic combination in today’s environment. Of these, 39% say their board and management team are more likely to consider such a deal compared to before the pandemic — representing a shift in mindset for some bank leaders.
Increased Focus on ESG in M&A
While most banks are unlikely to take a comprehensive view of environmental, social and governance (ESG) issues when examining a potential deal, the majority of banks consider ESG factors when assessing strategic fit.
Optimism About the Economy
Almost three-quarters of respondents believe the U.S. economy will experience modest growth in 2022; 14% say it will grow significantly. Further, almost all say that businesses have recovered in their markets, though some sectors remain stressed. And while 88% report that business clients express concerns about supply chain disruptions and labor shortages, most believe that this won’t have a material impact on credit quality.
The survey includes the views of 229 directors, CEOs, CFOs and other senior executives of U.S. banks. Full survey results are now available online at BankDirector.com.
About Bank Director
Bank Director reaches the leaders of the institutions that comprise America’s banking industry. Since 1991, Bank Director has provided board-level research, peer insights and in-depth executive and board services. Built for banks, Bank Director extends into and beyond the boardroom by providing timely and relevant information through Bank Director magazine, board training services and the financial industry’s premier event, Acquire or Be Acquired. For more information, please visit BankDirector.com.
About Crowe LLP
Crowe is a public accounting, consulting and technology firm with offices around the world. Crowe uses its deep industry expertise to provide audit services to public and private entities. The firm and its subsidiaries also help clients make smart decisions that lead to lasting value with its tax, advisory and consulting services. Their financial services industry team of more than 800 professionals has more than 50 years of experience, works with financial institutions of all sizes and serves more than 1,800 financial services organizations. For more information, please visit https://www.crowe.com/industries/financial-services.
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