The race is on… to expand into new markets, to add new talent, to introduce new technologies that attract and engage customers. This race, playing out in cities and towns across the country, applies to many industries. For our purposes, let me build on this theme vis-a-vis three takeaways from Bank Director’s annual Bank Executive & Board Compensation Conference in Chicago.
(1) How companies develop executives, attract leadership and approach compensation in today’s highly competitive and economically challenging world was front-and-center in Chicago. As I wrote earlier this week, the environment that this country’s 7,000 or so banks operate in demands productivity, proficiency with technology and the ability to sell. Finding the right people to lead such efforts, especially when you consider that every organization has a different set of “players” with a unique collection of knowledge, experience and skills, proves challenging. Complicating matters is the fact that all banks are required to regularly assess whether any of their compensation plans encourage unnecessary or excessive risk-taking that could threaten the safety and soundness of the institution.
(2) Putting together compensation plans that reward growth and responsible risk takes many shapes. However, the “adverse economic cycle” has dampened some employees’ opportunities to earn — and at a corporate level, has slowed the anticipated pace of bank consolidation. While larger banks continue to increase in size, many smaller institutions are fighting for survival in today’s regulatory and low-interest rate environment. According to SNL, there were 235 whole-bank M&A transactions announced and 51 failed bank transactions for a total of 286 deals in 2012. Total deals, as a percentage of overall banks in the U.S., have remained relatively consistent over the years between 3% and 4%. Some interesting stats, courtesy of the Hovde Group:
- Since 2000, sellers over $1 billion in assets have commanded a 32% premium over those sellers less than $1 billion;
- In 323 transactions since 2000, sellers over $1 billion averaged a valuation of 246% of tangible book value; and
- In 2,729 transactions since 2000, sellers less than $1 billion averaged a valuation of 187% of tangible book value.
M&A activity is once again heating up as financial institutions look to achieve necessary scale to compete and thrive… and while I will not wager on the exact number of deals that will mark 2013, I will take the over on 2012’s results.
(3) The relevance of scale, the pace and volume of M&A activity and the dynamic tension between the “bid-and-ask” takes center stage at our next conference: our 20th annual Acquire or Be Acquired Conference. Held at the Frank Lloyd Wright-inspired Arizona Biltmore, we’ve put together a program that looks at the strategies potential acquirers might consider to the practical considerations the board needs to discuss. As proud and pleased as I am for this week’s successful event, I am already gearing up to open our biggest conference the week before the Super Bowl. Widely regarded as one of the financial industry’s premier M&A conferences, I am super excited by the hard work put in by our team and even more stoked to spend the next few months getting ready to welcome everyone to the desert. To that end, I will begin to expand upon the topics and trends that influenced the development of this year’s program in future posts.
Aloha Friday!
About That Ratio 