M&A in Banking Starting to Pick Up Steam

Expected regulatory changes and new merger and acquisition deals show opportunities are on the rise in the banking sector

While COVID has indisputably had an outsize impact on the business of banking, new movement in the regulatory environment and an uptick in M&A activity are showing signs of resilience, regardless of the pandemic’s challenges. Despite some predicting a dearth of mergers and acquisitions in the last half of 2020 due to COVID, nine new banking deals were announced in August alone, according to S&P Global which tracks movements by sector in its Market Intelligence Reports

S&P Global also reports banks are feeling more “confident and optimistic.” Their interview with James Stevens, partner at Troutman Pepper Hamilton Sanders LLP, finds impetus for M&A deals still present.  Stevens says, “That need for scale, cost-spreading, the need for efficiency, the need to seize opportunity — all those things that drive M&A were overwhelmed in March and April… As that cloud of asset quality and other general uncertainty dissipated a little, those drivers that were there before are still there and are maybe even more enhanced.”

Another positive industry development is news that the Justice Department’s antitrust division is overhauling how it reviews bank mergers for the first time since 1995. According to American Banker, “The fact that this new world was being governed by 25-year-old rules may be a big reason department officials recently announced an overhaul was underway.” After the department released a series of questions on September 1, Christopher Cole, senior regulatory counsel for ICBA said, “We’re encouraged by this,” and urged the Feds to look at guidance particularly for mergers in rural markets.