Most banking industry analysts went into 2016 expecting a busy mergers and acquisitions year given the busy fourth quarter activity in 2015.
Within two days in October 2015, KeyCorp announced plans to acquire First Niagara Financial Group Inc. for a little more than $4.1 billion and New York Community Bancorp Inc. also broadcasted its intention to buy Astoria Financial Corp. for slightly under $2 billion. Here on the West Coast, BBCN Bancorp Inc. and Wilshire Bancorp Inc. publicized their merger of equal proposals in early December 2015 in a deal valued at just over $1 billion.
In the past week, two more billion-dollar-plus deals were announced. Huntington Bancshares Inc. has plans to buy FirstMerit Corp. for approximately $3.3 billion and Chemical Financial Corp. and Talmer Bancorp Inc. communicated intentions for a $1.1 billion merger of equals.
While smaller community and regional bank M&A had dominated the space in 2014 and most of 2015, these five deals in the last three months are amongst the top 20 biggest bank deals in the last six years. This signals that M&A activity will not only continue to be strong with the smaller banks but also with the larger regional players.
Given the challenging regulatory and low interest rate environment, financial services providers continue to see M&A as their leading source of growth and synergy. Organic loan growth has been modest at best throughout most of the country. Banks also face challenges to lower costs to serve customers while also trying to keep up with the enhanced customer experiences and ease of doing business of their competition – competition consisting of both traditional banks and industry disruptors. By the same token, significant investment in modern technology continues to be a major need at many institutions as well. Given these factors, bank boards continue to view M&A as a tried and true way to accelerate top line revenue and achieve cost savings in today’s environment.
Jordan Sternlieb leads West Monroe Partners’ Banking and Credit Unions Practice for California and the Southwest and John Stockamp leads the practice for the Pacific Northwest. For more information on how we partner with our clients in all aspects of the M&A lifecycle, please contact Jordan at firstname.lastname@example.org or John at email@example.com.