Smaller deals involving regional banks and wealth managers are driving acquisitions in the financial services industry, according to a clutch of industry watchers.
The deals reflect a broader shift away from mega-transactions and towards acquisitions that build capability and size, said Elyse Riley, a partner at EY.
“Our clients are looking at targets that are going to drive their growth agenda,” she said on Bloomberg TV Wednesday.
Earlier this week, Honolulu-based First Hawaiian Inc. announced it was paying $2 billion in an all-stock acquisition of California’s TriCo Bancshares. The merged bank would have about $34 billion in assets while significantly increasing First Hawaiian’s number of branches.
Artificial intelligence, and technology more broadly, is a key piece of the puzzle in financial services and for regional banks in particular.
“They just need to have scale,” said Margaret Tahyar, a partner at Davis Polk & Wardwell.
The key challenge facing deals is that there are more buyers than sellers, creating price mismatches that keep deal volumes lower than they could be, she added. That’s despite a seemingly open regulatory environment.
Carveouts from publicly-traded companies represent a growing slice of activity, illustrating how large public companies are shedding non-core assets, according to Lightyear Capital Partner Natalie Ings.
In addition to regional banks, wealth management advisers are also seeing succession planning emerge as a structural driver of consolidation. Smaller independent advisers are joining larger platforms to shed compliance burdens and create career pathways for younger staff, Ings said. That adds a demographic dimension to what is otherwise a technology-and-scale driven deal cycle.
Like this article? Let AdvisorHub come to you! Sign up