West Monroe recently published an article in our banking newsletter predicting that M&A would be on the rise in 2013. We’re nine days in and it seems to be coming true, at least in the Minneapolis-St. Paul metropolitan market.
The Minneapolis-St. Paul area is the country’s 14th largest economy with one of the highest concentrations of community banks, helping make it the 5th largest financial center in the country. According to last night’s article in the Star Tribune, M&A activity among Minneapolis banks is indeed on the rise with most of the activity occurring in rural banks.
There are a number of trends prompting a rise in M&A activity for banks – non-performing assets are down, capital is up, regulators are easing up slightly and there is pent up demand. But, it remains a volatile, uncertain, complex and ambiguous world. Transactions, no matter the size, are extremely disruptive to the existing business. There is risk in retaining acquired customers and a lack of organizational capacity. In addition, realizing operational synergy, a major impetus for the transaction, can be difficult to achieve.