News and notes from the first day of Bank Director’s annual Acquire or Be Acquired conference.
As was the case at last year’s Acquire or Be Acquired, the most successful banks have a clear understanding and focus of their market, strengths and opportunities. One big takeaway from the first full day of Bank Director’s conference (#AOBA15 via @bankdirector): to be a successful player in today’s bank M&A market, one needs adequate capital and earnings for regulatory approval of a deal, the infrastructure in place to both acquire and grow an institution and available sellers in the bank’s target market.
Overall, the issues I took note of where, in no particular order: $5 to $10Bn public banks are in the sweetest of the sweet spot for investors; cash is often useful to sellers as a form of price protection — and can benefit buyers as fewer shares are issued in a transaction; earnings estimates, not P/E Expansion, will drive bank stocks in 2015; deal pricing has a direct correlation to the size of the seller and the size of the buyer; bank boards should be particularly mindful of shadow banking’s strong relative growth.
Picked Up Pieces
I had a chance to talk with a number of attendees and introduce quite a few of our presenters. Here are some of the anecdotes I made note of throughout the day:
- There were 281 bank M&A transactions in ’14 as compared with 214 in ’13.
- This M&A activity, in terms of deal value, increased from $14bn in ’13 to $18bn in ’14.
- Whereas Mergers-of-Equals (MOEs) were the hot topic at this time last year, I can count on one hand the number of mentions today.
- Per KBW, we have had 20 current straight quarters of improving credit quality — the longest since 1991.
- According to Curtis Carpenter with Sheshunoff Investment Banking, 19x earnings is becoming a common median deal price.
- From a discussion on M&A-related capital raising… “in general, the pool of private placement buyers is increasing and includes many private equity firms as well as traditional institutional investors.”
- Bank executives would be wise to plan for this low-rate environment to last “forever.”
More to come from The Phoenician and Acquire or Be Acquired tomorrow.