"Holding Back at the Starting Line": Banks Await Clarity as Trump Policies Freeze Mergers and Acquisitions
Bank Merger-and-Acquisition Activity Slows in Q1 2021
Economic uncertainty caused by the Trump administration's policies, particularly erratic tariffs and unpredictable policymaking, negatively impacted bank merger-and-acquisition (M&A) activity in the first quarter of 2021.
The introduction of steep tariffs in April 2021 and other policy moves created a climate of uncertainty that squeezed finances across sectors, including banks and businesses considering mergers or acquisitions. This uncertainty forced many investors and companies to pause or reassess deals, reducing the appetite for new transactions in the bank M&A space and lengthening holding periods for private equity firms.
The quieter M&A market was also reflected in other investment exit routes like IPOs, which traditionally support private equity and banking sectors, showing a broader slowdown beyond just direct M&A. Consequently, overall estimated deal values began to decline after the first quarter, with some reports showing a drop of about 15.3% in deal value in the following quarter compared to the first, attributable to policy uncertainty and tariffs.
One all-stock transaction has been paused due to market volatility, with the buyer's stock price declining since the deal terms were agreed upon in December. Jacob Thompson, Dallas-based managing director of investment banking at Samco Capital, stated that larger regional or super-regional bank deals may need to see their stock value and price rise before pursuing a deal that involves stock issuance or a stock swap.
Travis Hill, acting chair of the Federal Deposit Insurance Corp., has labeled hastening the bank merger approval process a priority. Evansville, Indiana-based Old National received Federal Reserve and FDIC approval for its bid to acquire Minnesota-based Bremer Bank, a deal announced in late November. The Federal Reserve last month also approved acquisitions by Renasant Bank and EverBank.
Christopher Olsen, managing partner and co-founder of investment-banking firm Olsen Palmer, said that there has been consolidation pressure on banks, particularly smaller ones, for several years. Olsen Palmer works with banks nationwide with assets between $10 million and just under $10 billion.
Higher bank stock valuations can help facilitate dealmaking, but current market volatility is creating roadblocks for some would-be acquisitions. Hanchey also noted that publicly traded bank stocks are more affected by this uncertainty than the general market.
If economic uncertainty persists, Peter Winter, a D.A. Davidson analyst covering regional banks, is concerned pipelines may weaken. He noted one $30 billion-asset bank - eager to acquire another lender - said that M&A conversations had stalled more recently. If a recession causes credit losses, that will stall M&A like nothing else, according to Christopher Olsen.
If tariffs lead to a recession, Olsen will be watching the effect on credit quality at banks. If economic uncertainty persists, it may cause institutions to hesitate in acknowledging they are a buyer or a seller, according to Joe Silvia, a Chicago-based partner at law firm Duane Morris.
If you are a bank looking to acquire or merge, it may be wise to wait for market conditions to stabilise before making a move. The current economic uncertainty, particularly due to tariffs and policy unpredictability, is causing a slowdown in bank M&A activity.
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