For the longest time, the focus on bank mergers and acquisitions has been tilted toward the Southeast. Certainly M&A activity in the region is far from played out, but there are other areas emerging now as bustling markets for sizeable whole-bank and branch deals.
In the first half of the year, the West and Southwest produced deals with a combined announced value of more than $3.3 billion. That was well ahead of the more than $1.9 billion of deals announced in those regions in all of 2011.
The pipeline was particularly interesting in the West. While there were 10 fewer deals that came together there versus last year's first half, the total announced value of the deals was nearly eight times higher, according to data from Dealogic.
In California, UnionBanCal's $1.5 billion bid for Pacific Capital Bancorp, announced in March, was a lucrative deal for Pacific Capital's majority owner, the Texas financier Gerald Ford. He was offered 1.6 times tangible book value for the company-not rich by historical standards, perhaps, but at the time it was the third-highest premium to tangible book value seen since the start of 2010. Ford turned around two months later and offered 1.3 times tangible book value for Plains Capital in Dallas, in a $537 million purchase by the Ford-controlled Hilltop Holdings. That deal was the Southwest's largest in the first half.
Also active in the period was Prosperity Bancshares Texas, with three announced deals, all within its home state. Its $536.1 million purchase of American State Financial Corp. was the Southwest region's second largest deal, with league table credit going to Keefe, Bruyette & Woods, Prosperity's adviser, and Sandler O'Neill, which advised the seller. Prosperity's two other deals in the first half were much smaller. It picked up The Bank Arlington for $6.2 million and reached an agreement to buy Community National Bank in Bellaire for $26.4 million.
In the Northeast, a natural entry point for foreign banks, there was a smattering of M&A activity, driven in part by the economic crisis in Europe. Citizens Financial Group, owned by the eager-to-slim-down Royal Bank of Scotland Group, agreed in February to sell 56 branches — 52 housed within supermarkets — to People's United. The deal included all of Citizens' branches in New York City and on Long Island, and a handful of others in nearby locations. Meanwhile, Marathon Banking Corp., owned by Piraeus Bank of Greece, hired KBW to puts its 13-branch franchise in Queens on the block. There were at least five bidders, American Banker reported at the time. But this was no fire sale. Analysts expected Marathon to fetch 100 percent to 150 percent of tangible book. It got 151 percent from Investors Bancorp of Short Hills, N.J., which agreed to pay $135 million for the $902 million-asset bank.
What was missing from the first half was a mega-deal. The $1.5 billion that UnionBanCal paid for Pacific Capital was the highest price tag seen in any region.
The rest of the year is hard to predict given political and economic uncertainties.
Some of the deep-pocketed banks are busy digesting other deals. Jim Rohr, CEO of PNC Financial Services Group, which has made two multibillion-dollar acquisitions since 2009, says dealmaking is low on his priority list now. Small banks up for grabs are "very expensive," and their deposits "aren't worth very much," he told analysts on PNC's second-quarter conference call.
Then again, who saw last year's Capital One-ING Direct deal coming? And M&T Bank's $3.7 billion deal to buy Hudson City in late August caught many deal watchers by surprise and triggered a new round of speculation.
