Bank Mergers and Acquisitions

“The reality is organic growth is tough,’’ said Chris Myers, the president and CEO of the $7.2-billion Citizens Business Bank in Ontario, California, who spoke at our Acquire or Be Acquired conference in January.  His bank is one of those in the “sweet spot” for higher valuations and higher profitability, but even he feels the pressure to grow. “A lot of banks are stretching to try to grow [loans] and do things they wouldn’t have done in the past,’’ he said, commenting on the competition for good loans. “ We are going to need to do some acquisitions.”

By Al Dominick // @aldominick

The classic build vs. buy decision confronts executives in every industry.  For bank CEOs and board members today, mergers and acquisitions (M&A) remain attractive inasmuch as successful transactions improve operating leverage, earnings, efficiency and scale.  While I recently wrote that the best acquisition a bank can make is of a new customer, today’s post looks at what’s happening with bank M&A by sharing a few of my monthly columns that live on BankDirector.com:

  • Why Big Banks Aren’t Merging — with global companies announcing huge acquisitions, I look at where the banking industry is today.
  • Stressed Into Selling — after the largest U.S.-based banks passed the Federal Reserve’s stress tests, I write about modeling various economic conditions that might help a bank’s board to anticipate potential challenges and opportunities.
  • Don’t Sell The Bank —  figuring out when a bank should be a buyer—or a seller—had been on my mind since the Royal Bank of Canada announced a deal for “Hollywood’s bank,” City National, and this piece explored why now is not the time to sell.
  • Why Book Value Isn’t the Only Way to Measure a Bank — as the market improves and more acquisitions are announced, why I expect to see more attention to earnings and price to earnings as a way to value banks.
  • Deciding Whether to Sell or Go Public — while the decision to sell a company weighs heavily on every CEO, there comes a point where a deal makes too much financial and cultural sense to ignore.

In addition to these five columns, I invite you to read this month’s column, “Mind These Gaps,” which posts today on BankDirector.com.  It focuses on various pitfalls that have upended deals that, on paper, looked promising (e.g. due diligence and regulatory minefields, the loss of key talent/integration problems and bad timing/market conditions).  With perspectives from some of the country’s leading investment bankers and attorneys, it is one I’m pleased to share.  Don’t worry, unlike other sites, there is no registration — or payment — required.

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