Financial institutions ripe for mergers and acquisitions

If your financial institution has recently been involved in a merger or acquisition, or may be in the near future, you are not alone.

Sixty-five percent of the respondents to KPMG’s 2013 Community Banking Industry Outlook survey said they expect their bank to be involved in a merger or acquisition over the next year as either a buyer or seller. Respondents said regulatory reform, geographic expansion, and access to new markets were the main factors driving these deals.

There is little doubt that smaller financial institutions are increasingly focused on growth by creating size and scale through mergers and acquisitions. Thad Woodard, president and CEO of the North Carolina Bankers Association, believes the trend is nationwide and his state is no exception. He told the News & Observer newspaper that North Carolina will likely have 10 fewer banks by the end of this year due to mergers and acquisitions.

He goes on to say that some community banks are actually working to become more attractive to buyers by making small acquisitions themselves, a strategy he calls “applying a brighter shade of lipstick.” There has also been discussion that some smaller community banks have dropped their asking prices after sluggish performance over the last few years, making them a better bargain.