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The pace of bank mergers slowed in the second quarter, but deal announcements still rose about 15% in the first half from a year earlier, according to SNL Financial.
July 11 -
Henry Michaels and Jerry Wiant of RBC Capital Markets give their outlook for deals and pricing, discuss why taking stock can still be a good thing for sellers and advise bank buyers to manage investor expectations.
July 6
An uptick in small-bank deals in the first half has some community bankers slightly more optimistic about their M&A prospects.
Executives at FirstMerit (FMER), Home BancShares (HOMB), F.N.B. (FNB) and elsewhere detailed the promising signs in discussions of second-quarter results, though they stopped well short of predicting a flood of deals.
"There are a number of institutions who — our sense is that both boards as well as management — have become tired of the difficult environment," FirstMerit Chief Executive Paul Greig said. "There are actually a number that are engaging in what I would consider meaningful conversations."
There were 106 deals worth $5.28 billion during the first half of 2012, compared with 92 deals worth a combined $16.17 billion a year earlier, according to a recent SNL Securities report. Last year was the
FirstMerit, of Akron, Ohio, has looked at about 35 acquisition targets in two years, Greig said, citing "high price expectations" as the "primary reason" it did not buy any of them.
Though others are pessimistic about the bank-deals market, he said FirstMerit "would not in any way be as negative on M&A dialogue or M&A opportunities" as others.
There were other cautious optimists.
John Allison, the chairman of Home BancShares, said the Conway, Ark., company has been busy chasing deals. In recent months it has held talks with four takeover candidates, and at least two may come to fruition, Allison said.
"I thought I was going to be able to announce one today," Allison said on July 19, describing the negotiations as a "roller coaster."
"I think it's on right now.… I think it will happen in the next week," he said.
The other deal was in early due diligence, he said. One transaction fell through because it was a $1 billion-asset bank that feared Home's markdown of its loan values "would be more drastic than their marks," he said.
Home bid on a failed bank in July, and he said Home expects to see more such opportunities. The company may also look south for open-bank candidates.
"One of the bankers has presented us with some opportunities, he thinks, with some good banks in Florida that we probably will try to get around to at some point in time to look at," Allison said.
Gerard Host, the CEO of TrustMark (TRMK) in Jackson, Miss., said his company was not totally out of the M&A game despite its
"We're taking on the largest acquisition that we've done in this company and our focus remains there," Host said. "But certainly, as you know, the way the industry operates … you continue to have conversations and stay in touch with what's going on with other organizations."
Vincent Delie Jr., CEO of F.N.B. in Hermitage, Pa., said deal activity was building.
"I've seen more activity, more chatter in the market," Delie said on July 23. "With all the items facing financial institutions, I think we're going to see an acceleration in the number of opportunities. And I think that's starting to begin."
Some executives remain more pessimistic.
In giving his downbeat M&A forecast, Raymond Davis, CEO of Umpqua Holdings (UMPQ), alluded to the deal his Portland, Ore. company lost in April, when
"It is readily apparent consolidation is desperately needed. Interestingly price expectations remain elevated and are exacerbated by undisciplined acquirers," Davis said.
"We will continue to search out strategic partners in attractive markets. However, pricing must create future value, not irrational behavior."
John Barnes, the CEO of People's United Financial (PBCT) of Bridgeport, said he saw little happening on the deals front. It has made five acquisitions in the last two and a half years, and its last was
"I would say the environment has been very quiet and we remain focused on building the company through organic growth," Barnes said. He later added that "it is a difficult environment … and I certainly don't have a sense that there's going to be any big pace in M&A."
