Garnet Capital Advisors Blog

Mergers and acquisitions activity involving banks has been increasing, and this momentum has grown to include not only smaller banks in the U.S., but also midsize and international financial institutions. 

Challenges in midsize deals
Many have held the perception that transactions involving midsize banks are prohibitive, as such deals may not be feasible, according to American Banker. A transaction involving Hudson City Bancorp and M&T Bank, which was has been held up for years in an effort to obtain the approval of regulators, helped spur this mindset. 

However, a handful of deals involving midsized banks have come together over the last several months, which have helped to stir up some speculation about whether financial institutions holding between $10 billion and $50 billion will be able to combine, American Banker reported. 

Changing perceptions
"We're coming out of the ice age," John Roddy, senior managing director and global head of the financial institutions group at Macquarie Capital, told American Banker. "There's a degree of confidence that the largest 20 to 30 banks - excluding the very largest - could take a step and do deals." 

While these developments cover larger U.S. banks, Royal Bank of Canada recently made headlines by purchasing City National, which has a long history of working with high net worth individuals and boasts $33 billion in assets, according to American Banker. 

RBC enters US market
Three years after RBC sold its Southeastern U.S. retail banking operations to PNC Financial Services Group, the Toronto-based financial institution is paying a handsome 270 percent of City National's tangible book value, American Banker reported. Analysts have emphasized that paying this premium will allow RBC to enter the U.S. market by purchasing an established business. 

Even though the potential benefits make City National highly advantageous, the transaction will probably encounter substantial regulatory hurdles both in its home country and in the U.S., which casts some doubt on whether the high purchase price is justified, according to American Banker. 

Preparing for a deal
These very hurdles have put many banks into panic mode, as they ready themselves for any possible merger or acquisition, American Banker reported. While it is expected that banks will have their proposed transactions reviewed thoroughly by regulators, doing so certainly does not guarantee approval. 

In the stringent regulatory environment, banks that are considering taking part in any sort of M&A activity could benefit from shoring up their loan portfolios. One way they can increase the chances of reaching this objective is working with Garnet Capital Advisors, a loan sale advisory firm with experience spanning many types of debt.