Biggest Hurdles to M&A
June 17, 2013 1:27 PM
Bank M&A activity has been slow this year outside of an occasional spurt, and the deals have been relatively modest. Stubborn sellers, strict regulators and renewed stock market volatility are among the obstacles.
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Price Gap Narrows, But Not Enough
Seller's price "expectations have come down now that folks have realized just getting through their credit problems didn't solve their problem," said Walter Kaczmarek, CEO of Heritage Commerce (HTBK) in San Jose, Calif. "[But] there is still a little spread there -- don't get me wrong."
Under the Microscope
The Federal Reserve's demands that M&T (MTB) clean up its anti-laundering controls delayed its purchase of Hudson City Bancorp (HCBK) and sent a chill through midsize buyers in general who fear similar scrutiny.
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Currency Clash
Sellers are willing to accept lower multiples if they are getting a highly valued stock. But few bank stocks are performing as well as active buyer F.N.B. Corp. (led by Vincent Delie), which trades well above two times its tangible book value.
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Impatient Shareholders
Stockholders wary of diluted holdings have slammed deals with earn-back periods that last longer than two three years. However, a recent Virginia deal suggests that investors may be willing to give buyers more time to realize a deal's potential.
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Activist Investors
Atlantic Coast Financial shareholders, led by former Chairman Jay Sidhu, rejected a buyout offer by Bond Street Holdings and sent a message about the importance of getting stockholder buy-in .
Credit Worries Persist
Virginia Commerce, which has a high level of insider ownership and spent several years repairing its credit woes, raised capital three times before agreeing to sell to United Bankshares (UBSI) in one of the biggest deals of the year.
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Bye-Bye Bargains
Failures, and the banks at high risk of failure, are dwindling as the economy improves. That means there are fewer cheap deals available.
Too Big to Consider
The national deposit cap bars Wells Fargo (WFC) from buying any more banks, so it is has been focusing on wealth management and other nonbank targets, CEO John Stumpf recently said.
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