24 Oct, 2024

Bank M&A hits recent presidential term low point in Biden administration

By Zoe Sagalow and Hussain Shah


Fewer bank deals have come to market during the current administration under President Joe Biden, and those that do are taking longer to close.

Since 2021, the median days to complete bank deals increased to 151, 9.4% higher than in the administration under former President Donald Trump, which had the second-highest median days to close among all presidential administrations since 2001, according to an analysis by S&P Global Market Intelligence. The number of deals in 2024 is also on pace to come down significantly.

With a few months still left in the current presidential term, 504 bank M&A deals were completed from Jan. 20, 2021, to Sept. 25, 2024. Bank deals completed ranged from 892 to 1,077 in four of the five previous four-year presidential terms. The total number of deals dipped to 648 during President Barack Obama's first four years in office, but traditional transactions fell during that time frame in part because of the fallout from the global financial crisis of 2007–2009, when government-assisted deals spiked.

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It is the economy

The economy is a bigger driver of bank M&A than the political affiliation of the sitting president, and the liquidity crunch of 2023 certainly depressed bank M&A during a substantial portion of Biden's four years. The Biden administration has also made antitrust a priority across several sectors. An executive order from Biden in July 2021 called for increased scrutiny of M&A, and bank regulators have zeroed in on areas such as fair lending and the Community Reinvestment Act when reviewing deals, deal advisers noted.

The regulatory agency staff members who work with bank advisers largely remain the same from one administration to the next and contribute some stability to the review process, advisers said. But that is not to say there are no changes.

"The tone from the regulators ... is always impacted by the administration," Joshua McNulty, partner at Hunton Andrews Kurth LLP who focuses on topics including bank M&A, said in an interview. In general, "when you have a Republican administration, you have a little bit more of a friendlier tone from regulators or more partnership-esque tone. 'We're here to regulate you but help you figure things out.'"

Of the last six presidential terms, the highest number of $500 million-plus deals were completed during George W. Bush's second term as president, at 61, and the second-most was completed in Trump's term, at 51. The fewest large deals were completed during Obama's two terms, which had the fewest $500 million-plus deals at 13 and 19, respectively, compared to the 32 completed under Biden through the third quarter of 2024.

"Unfortunately, sometimes with a Democratic administration, there is a little bit more of an antagonistic tone that comes out of the regulators. That's not always the case, but it does seem to be a little bit more prevalent," McNulty added.

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The nuance of closing times

Although the median days to close increased during the Biden administration, the longest deals to close since 2001 are still BancorpSouth Bank's two purchases completed Jan. 15, 2018: its $112 million purchase of Ouachita Bancshares Corp., which took 1,468 days to complete, and its $209.5 million acquisition of Central Community Corp., which took 1,454 days to complete. These were delayed during the Consumer Financial Protection Bureau's investigation of allegations against BancorpSouth Bank for mortgage lending discrimination, and the bank ultimately paid a settlement of more than $10 million.

The third-longest pending deal was M&T Bank Corp.'s $3.81 billion acquisition of Hudson City Bancorp Inc. in 2015, which took 1,161 days to complete. This was the largest deal by value among the longest pending deals. An important factor in the slow closing was M&T's consent order related to Bank Secrecy Act and anti-money laundering compliance.

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A variety of factors can impact closing times.

Noncontroversial or small deals tend to be approved quickly, while deals take longer when they, for example, involve banks that need capital, would have high commercial real estate concentration ratios or are a similar size to each other, said Klaros Capital Managing Director Kevin Stein, a former managing director in Barclays' financial institutions group and a former associate director at the Federal Deposit Insurance Corp.

More complex deals require approval by the Federal Reserve Board and can take nine to 12 months or even longer, while simpler deals can be approved under delegated authority by the applicable regional Federal Reserve Bank and close in about 70 to 90 days, Stein added.

Recent history suggests that no matter which party controls the White House, large deals can close quickly when distressed companies are involved. Wells Fargo & Co.'s approximately $15 billion deal for Wachovia Corp. closed in 89 days in 2008 at the height of the credit crisis and tail end of Bush's second term, which had a median of 170 days to completion for $500 million-plus bank deals. The approximately $1 billion reverse merger between Banc of California Inc. and PacWest Bancorp — a bank caught in the crosshairs of last year's liquidity crunch — closed in just 128 days in 2023 during the Biden administration, which has had a median of 292 days to completion for $500 million-plus bank deals.

Presidential powers

Politics have the most significant impact on large or unique deals, said Joseph Silvia, partner at Duane Morris LLP, who advises financial institutions on M&A. Silvia was speaking about bank deals in general, not a specific transaction.

It is different for "the plain vanilla everyday community bank, regional bank types of deals. They don't really get politicized, and so it has less to do with the administration and much more so the economic cycle," Silvia said in an interview.

Silvia noted that what regulators review does not differ by president.

"At the end of the day, the statutory factors and the review and the supervisory functions — they don't change based on who's in the White House," Silvia added.

With inflation cooling, interest rates coming down and the pandemic in the rearview mirror, it's possible bank M&A would have picked up even if Biden won a second term in office. Advisers and bankers expect that economic factors impacting deals are improving and will continue to do so.

"I think most people in the industry are hopeful that with a little bit better valuations in bank stocks ... the Fed cutting rates so that some banks should have an easing in their [accumulated other comprehensive income] issues, and credit rate marks and interest rate marks, and a little bit just more consistency or stability in the market that we'll see deal numbers rise in 2025," Hunton Andrews Kurth's McNulty said. "People can make deals in bad times, and people can make deals in good times. It's the uncertain times where it's the most difficult to try to get a deal done."

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