Two big takeaways from the second day of Bank Director’s 20th annual Acquire or Be Acquired conference (#AOBA14): given the improving economic environment and low interest rates, lack of top-line growth could lead to further industry consolidation while regulatory burdens are increasing the need for scale in the industry.
90 Second video recap
Peering into a crystal ball
What if I told you that by December 31, 2018, we’d witness a 25% decline in the number of institutions between $500mm and $1bn, a 50% decline in the number of institutions between $1bn and $5bn, a 50% increase in the number of institutions between $5bn and $15bn and 5% annual decrease for all other categories? I can’t take credit for this consolidation prediction… that goes to Ben Plotkin the Executive Vice President, KBW and Stifel and Vice Chairman, Stifel Financial Corporation. He opened today’s conference with a look at merger activity and “its impact on the transformation of the banking industry.” Just one of many thought-provoking parts to today’s program.
Staging a Family Exit
The family dynamic in closely held banks is a powerful driver in bank mergers and acquisitions today, and deals involving closely held financial institutions often take a very different tack than transactions by their publicly traded brethren. With a number of smaller banks represented here — many of whom are family owned or are thinly held, I wasn’t surprised that one of our best attended breakout sessions focused on how banks, with under 500 shareholders, might consider staging a successful exit.
Overall, the issues I took note of where, in no particular order: banking is absolutely an “economies of scale” business; investors want to invest in buyers, not try to pick the sellers; the term “merger of equals” may be a misnomer; however, there are real benefits of a strategic partnership as banks look to stay relevant and achieve scale; BSA and AML issues have derailed and/or prevented quite a few deals from ever seeing the light of day.
More to come from the Arizona Biltmore tomorrow afternoon…