As I head west (to Los Angeles for a few days of meetings), I started to re-read a few recent M&A outlooks for 2013. Admittedly, I have a pretty long collection of white papers, analyst reports and opinion pieces in my Dropbox thank to our recently wrapped up Acquire or Be Acquired conference. As I dig through the various projections, it strikes me that capital, liquidity and credit have improved at many U.S. banks since I rejoined the financial community in September of 2010.
Now, I draw no parallel to my return and this improvement — but do take comfort in hearing so many bank executives and board members voice more and more optimism about their months ahead. That said, when I look back at 2012, I think few would contest that it was a year plagued with limited loan growth & intense margin pressure.
I share this as I think about the factors that will spark more M&A deals in 2013 than 2012. Fortuitously for today’s piece, I have some “inside” knowledge to share. You see, with more than 700+ joining us at the Phoenician at the end of January, I had the chance to moderate a panel composed of two attorneys and two investment bankers. I asked each to take a stance — pro or con — on the following statements before opening things up to the audience (of bank CEOs, CFOs, Chairmen and board members from 275 community banks). What did we find?
- 68% responded that 2013 will be the best year for bank M&A since the financial crisis of 2008.
- It was a near dead heat (52% taking the con) that pricing for a well performing bank less than $1 billion will not exceed 1.25X tangible book or less.
- 58% voted that the primary obstacle to doing a deal will be unrealistic price expectations of sellers.
- 60% voted that banks that are thinking of selling would be better off waiting until 2014 when valuations will be higher that they are likely to be in 2013.
Not surprisingly, a strong and vocal 72% disagreed with the idea that banks need to be a minimum of $1 billion in asset size to be competitive in today’s market. While certain economies of scale tip in favor of those above our industry’s magic number, I have to agree with the majority on this one. Yes, compliance costs continue to escalate — and regulatory burdens, well, don’t get me started…
For more on this three-day conference, I encourage you to read “A Postcard from AOBA 2013.” Penned by our editor, Jack Milligan, his gift with the written word writes circles around my amateur efforts.