Bank merger-and-acquisition momentum accelerated in the second half of 2024, and deal advisors expect activity to pick up even further this year. With more sellers coming to the fore and
The Biden administration emphasized intense regulatory reviews of bank deals — citing antitrust concerns — and this curbed activity through much of the outgoing president's tenure. President-elect Trump campaigned on deregulation promises, including a lighter degree of scrutiny applied to M&A reviews. Trump's Republican party also secured majorities in the U.S. Senate and House, allowing for a more unified legislative agenda.
"We expect the merger-and-acquisition rebound to continue in 2025 and are actively engaged in conversation with clients about their pipeline and deal strategy," said Dan Goerlich, PwC's banking and capital markets deals leader.
There were
The two largest deals of 2024, both valued at about $2 billion,
Goerlich said the Federal Reserve's pivot to lower rates after curbing inflation last year and the Republican sweep in the election are galvanizing dealmakers. Lower borrowing costs should support economic activity and loan demand, he said, bolstering bank profits that can be used for acquisitions. Trump's pro-business stance is stirring expectations of compliance cost relief while also raising hope that new regulatory agency leaders will aim to make the merger review process more efficient and transparent, he added.
Pent up dealmaking demand in the banking sector could be unleashed, Goerlich said, resulting in "fierce competition" when assets or whole businesses come up for sale.
Ernst & Young's Mitch Berlin, Americas strategy and transactions vice chair, agreed. "Dealmakers finally have the clarity they need to proceed with cautious optimism and pursue ambitious growth in 2025," he said.
Fitch Ratings analysts noted in their U.S Bank 2025 outlook that House Financial Services Committee members recently proposed measures to reduce obstacles for M&A in the banking sector. Key measures include the automatic approval of bank deal applications unless denied by federal regulators within 120 days and allowing regional Federal Reserve banks to quickly approve mergers of small and midsize banks if they meet certain regulatory criteria.
Wells Fargo CEO Charlie Scharf validates some of the optimism, telling analysts he feels "really great about our progress." But he said executives "don't want to get ahead of ourselves."
The Fitch analysts noted the continued need for scale to increase efficiency and banks' ability to absorb higher technology costs. This is motivating small banks to sell and larger lenders to buy peers to gain heft, broaden geographic reach and diversify business lines.
Beyond banks
A Citizens Bank survey of 400 business leaders at U.S. middle market companies and private equity firms found broad expectations for mounting dealmaking across the banking industry and most sectors.
The survey found the highest level of optimism for the M&A market in five years. PE firms were especially bullish, with 68% saying the deal environment was strong and 64% saying they expected activity to increase in 2025.
Overall, more than half of decision-makers – 54% – told Citizens they believe the current M&A environment is strong and nearly 90% expect valuations to be stable or higher over the next year, fueled by several factors, including economic growth, easing inflation concerns and buyers' willingness to pay more for attractive sellers.
Another notable factor in the rosier outlook for M&A is a larger pool of potential sellers when compared with last year: 73% of middle-market companies self-identified as potential sellers in 2025, up from 65% last year.
'Enthusiasm is palpable'
"The prevailing headwinds of recent years have really moderated," said Jason Wallace, head of Citizens' M&A advisory. "We see companies and sponsors coming into 2025 with big plans and this year's survey shows how focused they are on the growth environment.
"The enthusiasm is palpable," he added, "and we are seeing a high level of M&A interest among both corporates and sponsors."
While the banking industry's aggregate deal value swelled last year, it was still far below this decade's peak in 2021 of $76.73 billion, according to S&P.
The current year presents an opportunity to return to lofty levels, however, said Anton Sahazizian, global head of M&A at Moelis & Co. "It's almost as if we've seen a light switch turn on" following the election, he said during a recent webinar hosted by S&P. "We are rapidly preparing for a significant amount of deals."
Jay Hoffman, co-head of North American M&A, echoed that upbeat view for deal activity across banks and all sectors.
"The Biden administration was very challenging," Hoffman said during the S&P webinar, noting Trump's stance on deregulation. "Predictability is the most important part. … The environment is setting up to have a very strong 2025."
