Recently I attended the Bank Director “Acquire or Be Acquired” Conference in Scottsdale, Arizona. The conference is an annual event updating attendees on the state of the financial industry M&A market.
It was interesting to hear the thoughts of a number of great speakers regarding the current environment and what to expect for 2020. While a multitude of issues were discussed, the following three factors were consistently identified as the primary drivers of merger transactions in the current market:
► Succession Planning
Planning (or lack thereof) for the next generation of bank leadership remains a significant issue for community banks. The aging of boards and shareholders continues to serve as a motivation for many banks to seek out acquisition partners. This is an issue faced by many rural banks in Arkansas and I expect that it will continue to spur M&A activity going forward.
► Low-Cost Deposits
Certainly not surprising to hear, but a number of speakers noted that a significant consideration in any acquisition is the desire to capture low-cost core deposits. These funding considerations will no doubt continue to drive deals in 2020.
► IT Costs and Fintech Competition
Rising technology costs also lead many smaller institutions to reconsider remaining independent. Pressure is also mounting with increased competition from nonbank financial service providers. Several speakers encouraged banks to not be afraid to take some risks with technology offerings provided that you are partnering with a reputable Fintech vendor — noting that enhancing the customer experience is of the utmost importance.
Robert T. Smith is a partner in the Little Rock office of Friday Eldredge & Clark. Email him at RSmith@FridayFirm.com.
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