04 November 2016

US banking landscape remains sparse in 2016

Considering the recent flurry of M&A activity targeting the US banking sector, with 18 deals worth an aggregate USD 1,233 million announced during October alone, you could be fooled into thinking that 2016 is set to top previous years, when actually the reverse is true. According to Zephyr, the M&A database published by Bureau van Dijk, in 2016 to date there have been 247 announced deals worth a total USD 23,524 million, representing the lowest annual value since records began and a new nadir in terms of volume (2002: 224).

The first half of the year started off well, with 181 announced deals worth a combined USD 15,954 million outperforming H1 2015 when USD 14,810 million was spread across 176 deals. However, this initial uptick has since tailed off and between 1st July and 3rd November there have been only 66 deals valued at USD 7,570 million. While dealmaking has mainly been kept within the US, the largest by value for 2016 to date involved a cross-border acquisition: Canadian Imperial Bank of Commerce launched a USD 3,800 billion public takeover for Illinois-based PrivateBancorp in September.

This is one of only five deals which have broken the USD 1,000 million-mark so far and the remaining four are acquisitions of FirstMerit, EverBank Financial, Yadkin Financial and Talmer Bancorp, all of which are at various different stages of announced, pending or completed. Signature Bank currently accounts for the largest capital increase after raising USD 297 million in January but there is still a little over eight weeks left until the clock chimes in the New Year. However, when compared to 2015, there is not a big difference in terms of the top deals by value as only seven acquisitions and minority stakes worth more than USD 1,000 million were signed off over the 12 months and, once again, a Canadian acquiror took pride of place at the top of the table after buying City National for USD 5,400 million to accelerate franchise growth south of the border. At USD 650 million, New York Community had the largest capital increase. Similarly, in 2014 there were only five deals worth more than USD 1,000 million – comprising both acquisitions and minority stakes - and only three in 2013.

Back to 2016 and the bottom end of the scale; Zephyr shows acquisitions account for 23 of the 25 deals with undisclosed values announced so far this year and they involved deals between the likes of: Beneficial State Bank and Pan American Bank; Renasant Bank and KeyWorth Bank; and Sunflower Financial and Strategic Growth. In a nutshell, the vast majority of acquisitions within the US banking sector have involved smaller institutions and, according to a report by S&P Global Market Intelligence picked up by Banking Exchange earlier this year, this may not change any time soon and could shrink even further as these smaller deals, in their words, do not move the needle that much.

© Zephyr