2023 Bank M&A Survey: Complete Results

Bank Director’s 2023 Bank M&A Survey, sponsored by Crowe LLP, surveyed 250 independent directors, chief executives, chief financial officers and other senior executives of U.S. banks below $100 billion in assets to examine current growth strategies, particularly M&A. The survey was conducted in September 2022, and primarily represents banks under $10 billion in assets. Members of the Bank Services program have exclusive access to the full results of the survey, including breakouts by asset category.

Despite a significant decline in announced deals in 2022, the survey finds that acquisitions are still part of the long-term strategy for most institutions. Of these prospective buyers, 39% believe their bank is likely to acquire another financial institution by the end of 2023, down from 48% in last year’s survey who believed they could make a deal by the end of 2022.

Less than half of respondents say their board and management team would be open to selling the bank over the next five years. Many point to being closely held, or think that their shareholders and communities would be better served if the bank continues as an independent entity. “We obviously would exercise our fiduciary responsibilities to our shareholders, but we feel strongly about remaining a locally owned and managed community bank,” writes the CEO of a small private bank below $500 million in assets.

And there’s a significant mismatch on price that prohibits deals from getting done. Forty-three
percent of prospective buyers indicate they’d pay 1.5 times tangible book value for a target meeting their acquisition strategy; 22% would pay more. Of respondents indicating they’d be open to selling their institution, 70% would seek a price above that number.

Losses in bank security portfolios during the second and third quarters have affected that divide, as sellers don’t want to take a lower price for a temporary loss. But the fact remains that buyers paid a median 1.55 times tangible book in 2022, based on S&P data through Oct. 12, and a median 1.53 times book in 2021.

Click here to view the complete results.

Key Findings

Focus On Deposits
Reflecting the rising rate environment, 58% of prospective acquirers point to an attractive deposit base as a top target attribute, up significantly from 36% last year. Acquirers also value a complementary culture (57%), locations in growing markets (51%), efficiency gains (51%), talented lenders and lending teams (46%), and demonstrated loan growth (44%). Suitable targets appear tough to find for prospective acquirers: Just one-third indicate that there are a sufficient number of targets to drive their growth strategy.

Why Sell?
Of respondents open to selling their institution, 42% point to an inability to provide a competitive return to shareholders as a factor that could drive a sale in the next five years. Thirty-eight percent cite CEO and senior management succession.

Retaining Talent
When asked about integrating an acquisition, respondents point to concerns about people. Eighty-one percent worry about effectively integrating two cultures, and 68% express concerns about retaining key staff. Technology integration is also a key concern for prospective buyers. Worries about talent become even more apparent when respondents are asked about acquiring staff as a result of in-market consolidation: 47% say their bank actively recruits talent from merged organizations, and another 39% are open to acquiring dissatisfied employees in the wake of a deal.

Economic Anxiety
Two-thirds believe the U.S. is in a recession, but just 30% believe their local markets are experiencing a downturn. Looking ahead to 2023, bankers overall have a pessimistic outlook for the country’s prospects, with 59% expecting a recessionary environment.

Technology Deals
Interest in investing in or acquiring fintechs remains low compared to past surveys. Just 15% say their bank indirectly invested in these companies through one or more venture capital funds in 2021-22. Fewer (1%) acquired a technology company during that time, while 16% believe they could acquire a technology firm by the end of 2023. Eighty-one percent of those banks investing in tech say they want to gain a better understanding of the space; less than half point to financial returns, specific technology improvements or the addition of new revenue streams. Just one-third of these investors believe their investment has achieved its overall goals; 47% are unsure.

Capital to Fuel Growth
Most prospective buyers (85%) feel confident that their bank has adequate access to capital to drive its growth. However, one-third of potential public acquirers believe the valuation of their stock would not be attractive enough to acquire another institution.

Poll: Price Remains Obstacle to Deals


Brighter days are ahead for community banking, according to 68 percent of the more than 200 bank CEOs, board members and senior executives participating in a series of audience surveys at Bank Director’s Acquire or Be Acquired conference, held January 25-27, 2015, in Scottsdale, Arizona. The annual event, which focuses on bank mergers and acquisitions, was attended by more than 520 financial executives and board members, primarily bank CEOs and board members, representing more than 300 banks, the majority of which are headquartered in the central United States. Two-thirds of attendees represented banks with less than $1 billion in assets.

The crowd at the event revealed a strong focus on acquisition opportunities, with 60 percent indicating that their bank will most likely buy another financial institution in 2015, and 16 percent indicating plans to sell. The audience revealed a greater likelihood to participate in M&A in 2015 than the banking community as a whole: Bank Director’s 2015 Bank M&A Survey, conducted in September 2014 and sponsored by Crowe Horwath LLP, found that 47 percent planned to buy, and just three percent to sell, this year.

When asked about the biggest barrier for banks seeking an acquisition in today’s market, attendees cited high price expectations on the part of the seller, at roughly one-third. Attendees were also asked which part of the M&A cycle worries them most: 44 percent cited pre-deal considerations, including price and negotiating the deal. This trumps post-deal concerns, such as integration, cited by 36 percent of attendees. 

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Thirty-four percent said that many targets don’t want to sell, underscoring that confident spirit that brighter days are ahead. Potential sellers may be willing to wait it out for a higher price. While the vast majority of the audience expressed confidence that they understand the value of their bank, 40 percent revealed they are not confident that their board knows what the bank is worth. 

On stage at the event, Rick Childs, a partner in Crowe Horwath’s financial advisory services group, said that price and an unwillingness to sell on the part of the target bank really fit hand-in-glove. Many banks don’t want to sell because they expect a high price. High dollar deals—those with pricing about 2.5 times tangible book value—receive a lot of attention, but “there’s a big chunk of deals that get done for less than tangible book value,” said Childs. The expectations of board members and shareholders may not align with those of the market.

There may be more buyers than sellers, but it’s not entirely a seller’s market. A track record of growth and profitability make for a more attractive seller. Almost half of the audience at Acquire or Be Acquired revealed that their primary reason to make an acquisition is to increase earnings per share. Childs said that investors have shifted focus to earnings potential, as opposed to worrying about tangible book value dilution as much, representing a positive step for the industry. Earnings are improving for banks, and targets are more attractive. “I think it’s the right focus to have on deals these days,” he said.

So how do you grow if your bank can’t find the right target at the right price? Not surprisingly, given the audience, 82 percent of attendees said that lending is the primary path to growth for their organization. The best opportunities for loan growth are in commercial real estate, according to 58 percent of attendees. Almost one-third cited commercial & industrial (C&I) lending, and 9 percent cited residential loans.

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Commercial real estate loans have been steadily rising since the fourth quarter 2012, according to the Federal Reserve Bank of St. Louis, following a steep decline beginning in the fourth quarter 2008. C&I lending experienced a similar fall, but recovered more quickly. Recovery in the residential loan market has been unsteady.

Childs told the crowd that he sees pockets of the country where lending is picking up, as companies that were forced to live within their means during lean years look to expand and invest in their businesses. But demand hasn’t picked up everywhere. Almost half of the audience said that, aside from regulatory costs, constraints on loan growth, including weak demand, have the most negative impact on the profitability of their institution.

What’s Ahead for Bank M&A? Results of the 2014 Bank M&A Survey


2014-MA-Survey.pngIs it harder to get regulatory approval for a deal these days? Fifty-eight percent of respondents to Bank Director’s 2014 Bank M&A Survey, sponsored by Crowe Horwath LLP, believe it is more difficult than five years ago. Specifically, bank executives and directors find that regulators have increased their scrutiny on aspects of the deal such as regulatory compliance and capital adequacy.

So will the regulators impede bank M&A, preventing that long-predicted increase in deals from happening in 2014? Bankers don’t seem to think so. In fact, 76 percent of respondents expect to see more bank M&A deals in 2014. Just 7 percent expect activity to decrease.

Will Basel III have an impact on M&A deals? Forty-one percent of survey participants believe that Basel III will result in an increase in deals, while 32 percent don’t think that Basel III will impact bank M&A at all. When asked about their own bank’s strategy, 54 percent feel that Basel III will have little impact, and 29 percent are unsure what the impact will be.

The survey is based on emailed responses this fall from 231 senior executives and directors of the nation’s banks on issues related to mergers and acquisitions, specifically focusing on what challenges and opportunities face buyers and sellers in the banking industry. Bank leaders were also asked to weigh in on what they expect the environment to yield in 2014, both for the industry and for their own institutions.

So what do potential buyers and sellers have to say about bank M&A for the coming year?

Findings include:

  • More than half, 52 percent, of respondents say that their bank plans to purchase a healthy bank this year. Will their plans come to fruition? Last year, the 2013 Bank M&A Survey found that 46 percent of respondents planned to purchase a healthy bank, while this year’s survey finds that just 24 percent purchased a healthy bank in 2013.
  • What are the barriers to making a deal? Thirty-five percent say that coming to an agreement on price is the single greatest challenge their boards face when considering an acquisition or merger of equals. Potential buyers, at 63 percent, say that pricing expectations are just too high. Forty percent worry about asset quality, and 38 percent say that the boards of targeted banks just aren’t willing to sell.
  • Will more banks consider a sale in 2014? Only 5 percent of respondents indicate that they’re willing to sell a bank. There are a number of reasons that these banks won’t sell out: Forty-eight percent say that the bank’s board and management want to remain independent, and 42 percent say that current pricing is too low.
  • When asked to provide the top three reasons for selling their bank, almost half of respondents say they would entertain a sale if the bank received an attractive offer. The second and third most popular reasons for a possible sale are the high cost of regulation, at 25 percent, and limited organic growth opportunities, at 23 percent.
  • Once the deal is done, what are the most difficult aspects of the acquisition? Assessing credit quality issues at the acquired institution is cited as a challenge for 53 percent of respondents. Post-merger integration, at 45 percent, and cultural compatibility, at 43 percent, continue to be problematic for buyers. However, many respondents report that they are satisfied with some of the stickier points of the deal, like cultural fit, growth in market share and technology integration.

Download the summary results in PDF format.