Banking M&A: Current Landscape, Recent Deals Announced, and Forecast for 2024

In 2023, banking M&A activity slowed down due to rising inflation and interest rate hikes. As 2024 progresses, banks are dealing with higher-cost funding, greater market volatility, and potential credit issues, along with upcoming increases in capital requirements due to proposed US Basel III reforms.

This article suggests banking and capital markets M&A outlook, describing the current landscape, regulatory challenges, and forecasts for 2024. Additionally, it highlights recent bank deals announced and addresses the most common challenges of banking M&A. Finally, it explores the benefits of using iDeals VDR for facilitating banking M&A transactions.

Understanding banking M&A

Banking M&A refers to the process where banks either merge with other financial institutions or acquire them. This can involve the purchase of a portion of another bank, a complete buyout, or a merger where two banks combine to form a new entity.

Banking M&A is a part of corporate strategy often aimed at achieving growth, expanding market share, acquiring new technologies, or improving operational efficiencies.

Recent trends

The banking sector in 2023 was heavily influenced by a series of notable bank failures, including First Republic Bank, Silicon Valley Bank, and Signature Bank in the United States, as well as Credit Suisse in Europe. These failures created a sense of instability that significantly impacted M&A activity within the banking industry.

The volume and value of bank deals in 2023 were lower than in 2022, primarily due to several factors:

• High interest rates. These led to lower valuations for many banks.
• Regulatory barriers. Increasingly strict regulations posed challenges for large-scale consolidations.
• Market conditions. Volatile economic conditions made it difficult for banks to engage in M&A.

Despite the overall decline, certain trends were noticeable. Some banks took advantage of distressed conditions to acquire troubled banks, deals that might not have been feasible under normal regulatory scrutiny.

Additionally, banks focused on divesting non-core assets to strengthen their balance sheets and pursued acquisitions in sectors like fintech and wealth management, which are less capital-intensive.

Regulatory landscape

Here are the key banking M&A news items related to regulatory changes and developments: 

• US regulation
  US Treasury Secretary Janet Yellen showed openness to deals post-failures, but the US Department of Justice signaled tougher scrutiny, especially for banks with assets over $100 billion. The high-profile failure of Toronto-Dominion Bank’s $13.4 billion acquisition of First Horizon highlights the regulatory hurdles.
• European regulation
  In Europe, strict cross-border capital and liquidity requirements have discouraged cross-border mergers. However, discussions within the European Central Bank suggest a potential easing of these barriers to promote cross-border consolidation.

Forecast for 2024

Several trends and factors are likely to shape the banking M&A 2024 landscape:

• United States
  Larger bank mergers may stay restricted due to regulatory and economic uncertainties. Yet, there could be more acquisitions of struggling banks as regulators focus on stability. Higher interest rates and economic challenges may uncover more troubled banks, prompting rescue-driven mergers and acquisitions.
• Europe
  While domestic deal activity might remain stable, significant cross-border transactions are less likely unless there is progress toward greater banking unions. Ongoing discussions at the European Central Bank may pave the way for reduced regulatory barriers, potentially leading to a series of cross-border mergers aimed at enhancing scale and profitability.
• Asia
  Asian banks are expected to continue pursuing opportunistic cross-border deals, though they will proceed cautiously due to potential value dilution and regulatory constraints.
• Second-wave asset sales
  Banks will continue to sell non-core assets to strengthen their core operations and free up capital. Stronger banks might seize these opportunities to gain scale and realize synergies, while some assets may be acquired by nonbank lenders. Regulatory scrutiny, though, could decrease their enthusiasm.
• Third-wave growth acquisitions
  2024 could see a rebound in M&A focused on acquiring new capabilities and growth engines, particularly in the fintech sector. As many fintechs face profitability challenges and struggle to access capital, banks may find attractive opportunities to acquire valuable technology assets at lower valuations.
• Investment management
  As we move into 2024, investment management M&A activity is likely to rise as organizations aim to build scaled platforms with in-demand asset class capabilities like private credit, real estate, and infrastructure.

Recent bank deals announced 

Here is a bank mergers and acquisitions list highlighting some of the most notable recent deals:

The most common challenges of banking M&A

The table describes the difficulties potential acquirers and sellers may encounter during banking M&A processes and suggests solutions to overcome these challenges.

Despite the challenges, there are several benefits for banks that manage these complex processes well. One benefit is enhanced resilience, as dealing with M&A obstacles makes an organization stronger and more adaptable. Integrating different systems and cultures often leads to innovation, resulting in new, more efficient processes and technologies that can improve services and products.

Successful M&A can also strengthen a bank’s market position by expanding its presence and improving efficiencies. Synergy realization is another benefit, leading to long-term cost savings and increased revenue from a well-done merger.

Benefits of using iDeals data room for banking M&A

iDeals virtual data room is a secure online platform designed to facilitate the storage, sharing, and management of confidential documents during complex business transactions such as M&A, due diligence processes, fundraising, and regulatory compliance.

It provides several advantages tailored to enhance banking M&A transactions, including:

1. Secure document management. iDeals VDR provides a highly secure platform for managing sensitive information involved in investment banking M&A transactions. With features like granular access controls, two-factor authentication, redaction, and dynamic watermarks, it ensures that only authorized users can view, download, or modify confidential documents.
2. Streamlined due diligence. The platform streamlines the due diligence process by centralizing all relevant documents in one secure location. This allows both buyers and sellers to efficiently review and analyze financial statements, legal contracts, regulatory filings, and other critical documents, leading to faster decision-making and deal execution.
3. Efficient collaboration. iDeals facilitates collaboration among deal participants, including bankers, legal advisors, asset managers, and selling and acquiring firms. Its intuitive interface and real-time collaboration features enable users to annotate documents, ask questions, and exchange feedback.
4. Audit trail. The provider ensures compliance with regulatory requirements and industry standards by maintaining a comprehensive audit trail of all user activities within the data room. This audit trail provides a transparent record of document access, modifications, and communications, which is invaluable during regulatory audits and due diligence reviews.
5. Advanced analytics and reporting. iDeals provides advanced analytics and reporting tools that offer insights into user engagement, document usage, and deal progress. These analytics enable stakeholders to track key metrics, identify potential bottlenecks, and make data-driven decisions to optimize deal performance and outcomes.

Among the clients of iDeals VDR are leading financial institutions, investment banks, law firms, private equity firms, venture capital companies, corporations, fintech businesses, and government agencies around the world.

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