Acquire or Be Acquired – Monday Recap

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.

Keith Alstrin of Alstrin Photography

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.

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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…

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