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Banc of California Inc.'s plan to acquire PacWest Bancorp, the largest bank deal thus far of 2023, offers some hope that a rebound in bank M&A could be on the horizon, but advisers acknowledged that the unique nature of the transaction makes it stand apart.
Banc of California announced in late July plans to merge with PacWest. The $1 billion-plus deal stands in stark contrast to the abysmal deal activity in bankland this year as institutions have grappled with uncertainty over the economy, interest rates and their own funding bases. Many potential deals would also be hungry for new capital since the required marks that a buyer must take on a seller's balance sheet often leaves the target with little equity.
Advisers said in discussions with S&P Global Market Intelligence that the outcome is favorable for PacWest since the bank found itself in the crosshairs of the investment community during the height of the liquidity crunch and had to pivot and work to bolster its funding through a variety of higher cost means against elevated deposit outflows.
The deal would not have come together without an infusion of capital, which came from well-known private equity firms Warburg Pincus LLC and Centerbridge Partners LP. The private equity involvement could be an important marker of investors' view of the banking space since the investors are willing to put capital to work in the sector at a time when uncertainty over the direction of interest rates and the economy has weighed on valuations.
In the latest "Street Talk" podcast, members of the S&P Global Market Intelligence news team highlight discussions with bank deal advisers, including senior members from Janney Montgomery Scott and Troutman Pepper Hamilton Sanders LLP. The advisers, both investment bankers and attorneys, discussed whether the deal will pass regulatory muster, the potential for further private equity involvement in the bank space and the outlook for bank M&A activity.
Banc of California, PacWest tie-up likely to receive warm regulatory welcome
PacWest Bancorp and Banc of California Inc.'s proposed merger is unlikely to face regulatory hurdles, potentially setting it up to serve as a harbinger for more regional bank deals.
In the first $1 billion US bank deal in nearly a year, the tie-up will put regulators to the test after they've signaled more openness to mergers following the industry tumult in March.
PE capital in PacWest deal 'the key that unlocked the door'
Banc of California CEO Jared Wolff's familiarity with PacWest and their shared branch footprint give the two banks solid strategic rationale for a combination. But an impediment was the small capital base of Banc of California, until private equity stepped in.
Merger with smaller bank caps PacWest's shrink-to-health plan
PacWest Bancorp was making progress against its plan to shrink its balance sheet as it coped with destabilizing deposit outflows, but its agreement to merge with the smaller Banc of California Inc. will likely bring it to the finish line faster than it could have accomplished on its own.
Merger deal is PacWest's 'shortcut to a likely inevitable final destination'
Analysts shared their thoughts on the planned combination of Banc of California and PacWest Bancorp.
US bank M&A roars back to life with 2 largest deals of 2023
Banc of California's $1.02 billion merger with PacWest and Atlantic Union's $443.7 million acquisition of American National Bankshares make up nearly 70% of total 2023 announced US bank deal value.
Banc of California, PacWest Bancorp to merge in all-stock deal
Santa Ana, Calif.-based Banc of California, the parent company of Banc of California NA, and Beverly Hills, Calif.-based PacWest Bancorp, the parent company of Pacific Western Bank, will merge in an all-stock deal.
Under the terms of the deal, Banc of California will be the legal acquirer, while PacWest will be the accounting acquirer, with fair value accounting applied to Banc of California's balance sheet at closing.
Banc of California also entered into investment agreements with affiliates of funds managed by Warburg Pincus LLC and certain investment vehicles, managed or advised by Centerbridge Partners LP and its affiliates, which will invest a total of $400 million for newly issued equity securities concurrently with and subject to closing of the merger.