The time it takes to close bank M&A deals has held steady so far in 2022.
The median deal close time over the past year was 141 days, up slightly from 140 days in March and about the same level seen in recent years, according to an analysis by S&P Global Market Intelligence. Still, some pending deals have surpassed the median mark by a considerable margin. New York Community Bancorp Inc.'s planned $2.56 billion acquisition of Flagstar Bancorp Inc. — announced in April 2021 — is the longest pending deal, followed by U.S. Bancorp's planned purchase of MUFG Union Bank NA, announced in September 2021.
Big deal issues
Large bank deals are generally progressing at a "methodical pace," said Arnold & Porter Kaye Scholer LLP Partner Michael Mancusi, who represents clients before state and federal bank regulators. "Small bank deals, particularly with larger buyers that have strong regulatory records, those seem to be getting done at a fairly quick pace," Mancusi said.
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Mancusi cited the vacancy of the Fed's vice chair for supervision as the main reason some deals are facing a prolonged approval process. President Joe Biden has also made scrutinizing mergers and acquisitions a priority by taking such steps as issuing an executive order in July 2021 calling for updated merger guidelines for banks and tougher examination of depository deals.
Institutions with smaller asset sizes usually have less complex business plans than larger companies, Mancusi said. Larger deals involve more complex analysis related to competition, and they generate more interest in community credit needs and impacts on Community Reinvestment Act compliance, he added.
Multibillion-dollar deals
Of all the deals pending, the largest is BMO Harris Bank NA's planned $16.3 billion purchase of Bank of the West, expected to close by year-end. The second largest is Toronto-Dominion Bank's planned acquisition of First Horizon Corp. for about $13.67 billion, expected to close by Jan. 31, 2023, and the third-largest deal is U.S. Bancorp's planned purchase of MUFG Union Bank NA, expected to close by year-end.
Billion-dollar deals approved this year
Three of the 12 bank deal approvals the Federal Reserve has announced so far this year had deal values in the billions of dollars. One deal was terminated after being approved, which was First Internet Bancorp's intended acquisition of First Century Bancorp. Three deals, all approved in May or June, have not yet closed.
Cost concern
An extended approval process can make the transaction more costly, said Jeremy Kress, an assistant professor of business law at the University of Michigan's Stephen M. Ross School of Business.
"The deal doesn't fall apart if the bank doesn't get regulatory approval by whatever the date is, but the deal gets more expensive for the bank, and I would imagine that the bank is going to be exerting pressure on the regulator to approve by that date so that the deal doesn't become more expensive," Kress, a former attorney at the Federal Reserve Board of Governors, said in an interview.