Is Your Financial Institution a Buyer or a Seller?
Let’s roll the clock back to 2004. The economy was strong, financial institutions were making money regardless of asset size, and the mergers and acquisitions (M&A) market was not just hot, but red hot. Now, let’s jump to 2010, after the economy turned. Suddenly, the buzz in the industry was that if you weren’t at least $250 million in assets, you wouldn’t be relevant in the future. Then that number quickly reached $1 billion — without high assets, you wouldn’t even be viable. On top of everything else, the M&A market was as good as dead.
Today, the economy has recovered, and M&A activity has followed. For the past several years, M&A activity has been brisk, with buyers getting back into the market and going strong. With this shift in the market, institutions should also shift their strategies and consider how M&A plays into their future.
What is driving today’s M&A activity?
CLA has represented sellers for the past 20 years. During that time, we have accumulated a list of more than 50 qualified buyers that we contact each time we are engaged to sell a financial institution. From 2008 to 2013, these buyers were, for the most part, out of the market.
Now that activity in the industry has increased, buyers are once again interested in gathering assets. Some are looking for loans, some are looking for deposits, and others are looking for intangible assets such as demographics or talent.
Meanwhile, sellers are being driven by:
- Lack of management succession
- Lack of available talent
- Cost of doing business (technology, operations, or regulatory matters)
- Increasing value of their organization
- Capital preservation (i.e., taking their money off the table)
Choosing between buying, selling, and being on hold
As you navigate the market, you’ll want to determine whether you identify as a buyer, a seller, or are on hold. When you sit down to talk about your institution’s strategic plans, this is one of the critical decisions you’ll need to make. While you don’t need an absolute answer to this question, discussing it early will generate some dialogue that can influence your institution’s next steps, including hiring decisions and whether or not to enter into contracts.
How we can help
CLA helps institutions of all asset sizes determine how M&A fits into their future plans. Our professionals are well-versed in valuation and transaction support, so we can help you review your options and develop an M&A plan that works for your institution.
Merger and acquisition services are offered through CliftonLarsonAllen Wealth Advisors, LLC, member FINRA and SIPC.