Page 25 - Banking Outlook 2014 - An Industry at a Pivot Point

Banking Outlook 2014: An Industry at a Pivot Point | 23

The mergers and acquisitions “wave” that was widely expected to rush through the
banking industry over the past several years amounted to something more like a ripple.
There were 162 bank mergers in the United States through the first nine months of
2013, up from 111 in the first three quarters of 2011.

Reexamine M&A

Opportunities

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Number of Bank Deals and Deal Values Since 2003
© 2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A.

16 80

14 13.71 70
12 60

10 50
8 40
6.35 6.64
6 35 30
4 3.22 3.33 20
2.35 2.01 15
2 1.39 1.75 10
0.60 0.78
0 0.22 0
Q1’11 Q2’11 Q3’11 Q4’11 Q1’12 Q2’12 Q3’12 Q4’12 Q1’13 Q2’13 Q3’13 Q4’13

Total deal Value ($B) Number of Deals
Source SNL Financial, excludes FDIC–assisted transactions. Used with permission
Still, mergers, joint ventures, and strategic acquisitions remain a powerful tool for growth and are likely to
increase in 2014. Why? All the old reasons still exist, including the burdensome cost of regulatory reform
on smaller institutions and the dearth of organic growth opportunities. But now, finally, the gap between
what sellers think their institutions should command in the marketplace and what buyers are actually willing
to pay appears to be shrinking, and moving into closer alignment with reality. While some sellers continue to
hold out for prices in the range of two to 2.5 times book value, some recent unassisted transactions were
20
completed at closer to 1.5 times book value. 21

20 “Banks Must Lower Expectations to Jump-Start M&A,” by Neil Hartman and Ken Siegman, American Banker, 6/27/13 –
http://www.americanbanker.com/bankthink/banks-must-lower-expectations-to-jump-start-m-and-a-1060209-1.html
21 “Banks Must Lower Expectations to Jump-Start M&A,” by Neil Hartman and Ken Siegman, American Banker, 6/27/13 –
http://www.americanbanker.com/bankthink/banks-must-lower-expectations-to-jump-start-m-and-a-1060209-1.html