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The Florida bank says that after a string of troubled-bank acquisitions that brought it lots of short-term benefits, it is turning to deals like its agreement for Gulfstream that will juice earnings over the long haul.
July 30 -
The number of bank deals and the average sale price fell in the first half, but M&A activity could increase the rest of the year if investors keep bidding up the stocks of bank buyers.
July 10 -
Prosperity Bancshares in Houston rarely participates in auctions, but CEO David Zalman was confident enough of his offer for FVNB to the bank solicit another bid. Zalman won, and Prosperity's investors embraced the result.
July 2 -
John W. Allison of Home BancShares finally got Liberty Bancshares to blink after 10 years of trying to buy it. Allison's persistence and the high multiples on Home's stock helped seal the deal.
June 26
Buyers are starting to crowd the M&A dance floor.
The postcrisis years had been a bank buyer's market. Loads of sellers were ready, willing and able and at times, desperate to pair up. For every seller holding out for two times tangible book value, there was another willing to take little to no premium and perhaps some stock with upside potential.
However, the market is shifting.
"We are actively looking but we do feel like there is some pricing pressure," Greg A. Steffens, president and chief executive of Southern Missouri Bancorp (SMBC) in Poplar Bluff, said last week in a conference call on its quarterly results.
Others who "failed to acquire are getting a little bit more antsy," he said. "There are more people looking and getting a little more aggressive on pricing."
It is about time the rest of the country caught up to the hot Texas market, says Dory Wiley, president and chief executive of Commerce Street Capital, a broker-dealer in Dallas. Wiley says that he has been warning for several years that
"Buyers don't want to give away their premium, but they need to be realistic," Wiley says. "It has been a little bit easier to see it coming from here, than it was in the Midwest or the Inland Empire [of Southern California]."
A deal priced at two times tangible book is relatively common in Texas. The rest of the country has a ways to go but will likely return to that level, Wiley says.
"Buyers know that they have to up their game and be a little bit more aggressive," Wiley says. "I won't call it a frenzy, because it is still very much a buyer's market. But pricing will be higher tomorrow than it is today because metrics will be better than they are today. There is no reason for pricing not to move up."
Other dealmakers say pricing pressure is part of an even larger shift in the market. Buyers are looking for targets that will add to their ability to make money long term, as opposed to chasing bargains. That strategy dovetails with
"Buyers are willing to pay higher to get a strategic acquisition," says Randy Dennis, president of DD&F Consulting, an advisor in Little Rock, Ark. The firm was involved in the
Dennis and Wiley mentioned the deal CenterState Banks (CSFL) announced last week as an example of the healthy prices buyers are willing to pay; the Davenport, Fla., bank agreed to
The $796 million-asset Southern Missouri is on the hunt for banks with strong deposit bases. Its loan-to-deposit ratio was nearly 102% at June 30, and it is looking for acquisitions flush with liquidity, said Andrew Liesch, an analyst at Sandler O'Neill.
Southern Missouri announced in June that it
Steffens said during the conference call that Southern Missouri was hoping to strike another deal soon, but that it was committed to deals in which it could earn back the dilution to tangible book value within three years. Even with the increased competition, he is sticking to that tenet.
Even if prices begin to rise, that should be easy to do, Wiley says.
"It is hard to screw up a deal if you paid under two time tangible book and have 30% cost saves," Wiley says. "Bankers are just afraid of being second-guessed on pricing at the country club or in New York."
