Series of big bank mergers gives lift to overall deal value

A wave of large bank mergers has lifted aggregate deal value for 2021 above last year's levels.

The overall value for transactions announced through June 1 was $28.9 billion, or more than triple the amount for deals struck over the same period a year earlier, based on data compiled by S&P Global Market Intelligence. 

The value for all deals announced in 2020 was $27.9 billion.

Five proposed sellers in 2021 — People's United Financial, Sterling Bancorp, Flagstar Bancorp, First Midwest Bancorp and Cadence Bancorp. — have at least $18.7 billion of assets. Fifteen others have at least $1 billion of assets.

There were nine deals announced in early 2020 where sellers had more than $1 billion of assets; all announced before the pandemic. One of those deals, Ally Financial's proposed purchase of Merrick Bank, was eventually called off.

Other than the merger of BB&T and SunTrust Banks, only six deals announced between January and May in 2019 had sellers with at least $1 billion of assets.

While the sellers are bigger, the overall pace of bank consolidation remains tepid compared to pre-pandemic activity.

Banks announced 70 mergers through June 1. While that is 62% more than a year earlier, it was 27% lower than the first five months of 2019. But deal flow has been steadier this year compared to 2020, when most transactions were announced before the pandemic hit the United States. 

Four merger agreements reached early last year were eventually terminated.

Premiums remain lower than they were before the pandemic, based on deals where terms were fully disclosed. The average seller commanded a price equal to 162% of its common equity during the first five months of 2021, higher than a year earlier but flat compared to 2019.