Banking and capital markets deals insights: Year-end 2018

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Deal value and volume overview

The announced deal value for BCM totalled $7.2 billion during the fourth quarter compared with $6.3 billion during the same period in 2017. Deal value during the quarter was the lowest since Q4 2017, and only one announced transaction exceeded $1 billion. Still, total disclosed deal value for all of 2018 hit $49.5 billion, a 49% increase over the $33 billion total during 2017.

Three of the top five deals during Q4 2018 were among regional banks, with an average transaction size of $700 million. The deals included:

  • CenterState Bank Corporation’s acquisition of National Commerce Corporation for approximately $840 million.
  • Ameris Bancorp’s agreement to acquire Fidelity Southern Corporation for approximately $740 million.
  • Union Bankshares Corporation’s acquisition of Access National Corporation for approximately $610 million.
Banking and capital markets deal activity

"Financial services deals are roaring across all sectors at values we haven't seen for many years. M&A opportunities are ripe among regional banks, FinTech, asset and wealth management, payments businesses, and all types of insurance firms.”

Greg Peterson - US Financial Services Deals Leader

After a prolonged period of relative quiet in bank M&A activity, attitudes toward deals showed signs of shifting in 2018.

The community and regional banking sector dominated the M&A market during the year, representing approximately 67% of total deal volume. We expect this trend to persist—consolidation is the best path forward for many banks in the sector, especially those that are beginning to invest in digital transformation.

The gradual shift from record-low interest rates during 2018, and the expectation of more rate increases to come, may intensify competition for deposits among national and regional banks. While larger banks may be better able to attract additional deposits through incentive offerings, small banks may focus on deposit book acquisitions, spurring further consolidation of the market.

Middle-market banks are starting to view M&A as a viable way to use the extra capital and higher cash balances generated by the cut in corporate tax rates. Banks seeking to benefit from the increase in the SIFI threshold to $250 billion are especially eager to put the additional capital to work through deals. Other regulatory changes announced during the fourth quarter may prompt M&A activity, including the Federal Reserve’s decision to ease the regulatory burden for banks with up to $700 billion in assets.

We continue to believe the strategy of mega banks will be to focus on financial technology and disruption, in keeping with demands of their customer base. With the rising focus on leveraging Big Data, M&A strategies will probably be employed to acquire the products, technology, and data analytic capabilities required to remain competitive and relevant in a rapidly changing market. In a recent example, Fiserv Inc. on January 16th announced the acquisition of First Data Corp. in an all-stock deal valued at $22 billion, combining two firms that focus on fintech and payment systems.

The ready access to capital for US investors, particularly private equity (PE) firms, continues to fuel deals activity. With large financial service institutions seeking to offload non-core businesses, the transaction-related cash flows generated by consumer demand may appeal to PE firms.  

Rising bank valuations fueled by market appreciation during the first half of the year slowed bank M&As. During the fourth quarter, slowing deal volume coincided with higher stock market volatility. It remains to be seen if lower bank valuations will spur M&A activity in 2019.

Overall, signs of stronger interest in M&A have emerged as banking clients seek advice on potential deal models, integration/synergy identification, and monitoring tactics. M&A is clearly back on the agenda for in-house corporate development teams.

Contact us

Greg Peterson

Financial Services Deals Leader, PwC US

Tel: +1 (646) 818 7983

Scott Carmelitano

Banking and Capital Markets Deals Leader, PwC US

Tel: +1 (213) 308 2892

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