Above-market M&A returns should encourage bank executives
Above-market M&A returns should encourage bank executives
Insight

Above-market M&A returns should encourage bank executives

Over the last five years, mergers and acquisitions have generally resulted in above-market returns for acquirers in the US banking industry.

Over the last five years, mergers and acquisitions have generally resulted in above-market returns for acquirers in the US banking industry. We believe this trend will continue resulting in continuing market strength and we expect M&A deals in the US to continue into 2018 as banks focus on interest rate management, fee income expansion, cost take-out efforts and lingering compliance costs. Our research of 394 US-domiciled bank transactions announced between January 2012 and October 2016 revealed:

  • The market typically rewards acquirers for conducting acquisitions, as evidenced by higher market valuations post-announcement;
  • Acquiring banks’ outperformance, where observable, increased linearly throughout our measurement period, from 90 days post-announcement to two years post-announcement;
  • The positive effect was experienced throughout the date range examined;
  • Banks of all sizes experienced a positive market reaction, with one notable exception.

Amongst banks with more than $10 billion in assets, acquirers did not demonstrate statistically significant differences in market returns when compared to banks that did not successfully execute an acquisition.

Knowing that the current marketplace has rewarded M&A in the banking sector, bank executives should feel confident pursuing deals today. However, they should approach transactions with a thoughtful alignment of M&A strategy with business strategy, an organized and vigilant approach to due diligence and integration, and trusted advisers to complement internal teams and ensure seamless transaction execution. Reach out to us when you’re ready to discuss your M&A strategy, and in the meantime we’re pleased to provide the full report.