Market Overview

Is Bank M&A Action On The Way?

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Is Bank M&A Action On The Way?

  • Despite recent high-profile banking M&A deals, the 2015 banking M&A environment has been typical of past years.
  • Oppenheimer has observed a rationale shift for post-crisis banking deals.
  • Most post-crisis deals are motivated by cost savings.
  • Recent high-profile M&A deals in the banking space prompted Oppenheimer analyst Ben Chittenden to release a new report addressing the banking M&A environment. According to Chittenden, 2015 banking M&A is in-line with historical levels, and Oppenheimer expects it to stay that way headed into 2016.

    Related Link: M&A Chatter For Tuesday, November 17, 2015

    Old Normal

    Chittenden reported that the number of annual banking M&A deals has ranged between 200 and 300 deals since 2000. So far in 2015, there have been 244 deals, putting this year right in the middle of the historical range.

    In 2015, assets per deal have been on the rise, and Chittenden reported that buyers are getting historically good deals. The average 2015 deal has priced at 1.4x total book value (TBV), well below the historical average premium of 17x TBV.

    Rationale Shift

    While the rate of M&A activity in banking has been relatively steady since 2000, Chittenden noted a shift in rationale for the deals. During the banking M&A boom from 1980-1998, deal rationale was mostly evenly split between cost savings and expansion.

    “What we see post-crisis is a shift in focus toward more cost savings,” Chittenden explained.

    Top Targets

    It’s always difficult to identify buyout targets, but Oppenheimer constructed two screens to look for top banking buyout candidates. One screen focused on branch density and cost savings, and the other screen focused on smaller banks with low P/TBV and high efficiency ratios.

    After combining the screens, Oppenheimer listed the following five banks as top buyout targets:

    • 1. BancorpSouth, Inc. (NYSE: BXS)
    • 2. Heritage Financial Corp (NASDAQ: HFWA)
    • 3. First Horizon National Corp (NYSE: FHN)
    • 4. Trustmark Corp (NASDAQ: TRMK)
    • 5. UMB Financial Corp (NASDAQ: UMBF)

    Disclosure: The author holds no position in the stocks mentioned.

    Latest Ratings for BXS

    DateFirmActionFromTo
    Jul 2020Piper SandlerInitiates Coverage OnNeutral
    Jun 2020Janney CapitalDowngradesBuyNeutral
    May 2020SunTrust Robinson HumphreyMaintainsBuy

    View More Analyst Ratings for BXS
    View the Latest Analyst Ratings

     

    Related Articles (HFWA + BXS)

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