News and notes from the second day of Bank Director’s annual Acquire or Be Acquired conference.
My biggest takeaway from the second full day of Acquire or Be Acquired (#AOBA15 via @bankdirector): instead of asking why take the risk of doing a deal or why take the risk of creating a high performing bank, a better question might be can you be relevant if you don’t?
To start the day, I polled the audience — using an automated response system — on a number of non-M&A topics. Of note, the majority of attendees believe the greatest organic loan growth opportunity is in commercial real estate. Likewise, the majority of people voted for cash management services to businesses when asked what provides them with the greatest fee-growth opportunities. Anecdotally, the issues I took note of where, in no particular order:
- The expansive views of the regulators continue to frustrate bankers;
- Where stock will be issued in a merger, an auction may not only be not required, but can be counterproductive from maximizing value to shareholders — hence the reasons why negotiated sales processes are gaining in popularity;
- Key regulatory obstacles remain centered on compliance -‒ for buyers and sellers alike (e.g. BSA, consumer and increasingly, CRA);
- There have been 28 transformational mergers — one bank acquiring another that is over 25% of its size — since 2013. These are merger of like-sized companies (yes, we are getting away from the term MOE). The market likes these deals — stocks in these deals have out-performed the market.
Picked Up Pieces
A really full day here in Scottsdale, AZ with quite a few spirited discussions/debates. Here are some of the more salient points I made note of throughout the program:
- The only thing worse than a flat yield curve is an inverted one.
- If stocks do well after a deal, means you have the runway to do more deals in the future.
- When it comes to buying another institution, keep in mind just because somebody has the money doesn’t mean they are going to spend the money.
- Per Bill Hickey at Sandler O’Neill, capital markets are “open for business” given the lower rate environment and attractive yields/costs for both issuers and investors alike.
- Without big bank M&A, community groups now review and protest transactions by much smaller banks.
- A fundamental truth: as you grow, compliance & regulatory expectations grow with you.
More to come from The Phoenician and Acquire or Be Acquired tomorrow morning.