Survey Indicates Bank Merger and Acquisition Market Likely to Remain Stalled

CHICAGO, Feb. 29, 2012 /PRNewswire/ -- Bank merger and acquisition activity stalled significantly as a result of the 2008-2009 financial crisis. The holding pattern will likely continue this year, according to a survey of independent bank directors, CEOs and other senior executives. Forty-eight percent of the 225 respondents said they didn't expect to make any type of acquisition in 2012.

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The survey was conducted via email by Crowe Horwath LLP, one of the largest public accounting and consulting firms in the U.S., and Bank Director magazine in October 2011. For many of the questions, respondents were able to select multiple answers. Of those respondents who said they would consider doing an acquisition, 37 percent expressed interest in a healthy bank, 27 percent in a healthy bank's branches and 23 percent in a failed bank purchased through the Federal Deposit Insurance Corporation (FDIC).

"While activity is occurring, it is at levels well below pre-crisis levels. So far this this year the activity is consistent with the same year-to-date period in 2011," said Rick Childs, a director in Crowe's Audit and Financial Advisory practice. "We are seeing some opportunistic buying, but buyers are being careful with what they take on."

Other survey findings include:

• Sixty percent of respondents didn't complete any acquisitions in the three-year period ending in October 2011. Of those that did, 13 percent said their most recent acquisition was a healthy bank, 12 percent participated in an FDIC-assisted deal and 9 percent bought branches. 
• When asked to identify the most difficult aspects of their most recent acquisition, 58 percent of respondents cited due diligence, 55 percent said negotiating price and 53 percent cited post-merger integration. According to Jason Bomers, a principal in Crowe's Performance practice, the respondents may not realize the importance of integration, because it's tough to comprehend all the different variables involved, including technology, business practices, culture and personnel. "Post-merger integration is crucial to the success of the deal, since the deal is based on the elimination of a certain percentage of cost," he said.
• When asked for their top reasons for considering a bank acquisition, 61 percent of respondents said they wanted to supplement or replace organic growth and 60 percent cited an increase in market share. Thirty-eight percent were looking to rationalize the cost of regulation over a wider base and 23 percent were interested in using surplus capital.
• Respondents were asked what the top barriers to buying another bank were and 66 percent said they were worried about the asset quality of potential targets. Fifty-seven percent of respondents noted that the pricing expectations of potential targets are unreasonably high.
• The reluctance of potential sellers was also evident when respondents were asked if their institution planned on selling a branch, line of business, loan portfolios or the entire bank in the next 12 months. Eighty percent said they have no such plans.

According to Childs, there are still more than 800 banks in trouble, so there could be an active market for FDIC-assisted deals. However, he does not think there will be a significant increase in healthy bank acquisitions. "I think potential buyers will wait for a stronger economy to lessen their risk when doing an acquisition, and sellers will likely wait for better pricing. It looks like 2012 will be a pretty sluggish year," said Childs.

For more survey results and information on bank mergers and acquisitions, please visit www.crowehorwath.com/bankdirector.  

About Crowe Horwath

Crowe Horwath LLP (www.crowehorwath.com) is one of the largest public accounting and consulting firms in the United States. Under its core purpose of "Building Value with Values®," Crowe assists public and private company clients in reaching their goals through audit, tax, advisory, risk and performance services. With offices coast to coast and 2,500 personnel, Crowe is recognized by many organizations as one of the country's best places to work. Crowe serves clients worldwide as an independent member of Crowe Horwath International, one of the largest networks in the world. The network consists of 150 independent accounting and management consulting firms with offices in more than 580 cities around the world.

About Bank Director

Bank Director magazine is the leading information resource for senior officers and directors of financial institutions, credit unions, insurance companies and investment advisors. The quarterly publication provides readers with the tools necessary to successfully handle the governance challenges impacting boards including mergers and acquisitions, retail strategies, compensation and technology. Since its inception in 1991, Bank Director has become recognized as the essential resource for top decision makers in the financial services industry. For more information, visit www.bankdirector.com.

SOURCE Crowe Horwath LLP