Top bank M&A deals of 2018

Bank M&A was sporadic in 2018.

Three of the biggest bank deals — Fifth Third Bancorp’s agreement to buy MB Financial, Cadence Bancorp’s for State Bank Financial and Independent Bank Group’s for Guaranty Bancorp — were announced within a nine-day period in the spring.

The remaining seven deals in the top 10 were spread throughout the year.

Overall, there were 253 deals announced as of Dec. 7, based on data compiled by Keefe, Bruyette & Woods and S&P Global Market Intelligence — virtually the same number as last year.

The combined value of all deals as of early December — $28.6 billion —
was 8% higher than the total for the full 2017. However, the Fifth Third-MB Financial deal accounted for 16% of the $28.6 billion.

An underlying theme involved sellers in high-growth markets finding buyers willing to pay healthy premiums for market share.

The average premium in 2018 was 172% of the seller’s tangible book value, an increase from 165% in 2017.

Only two deals in the top 10 occurred in one state — Colorado.

Here is a breakdown of the biggest bank acquisitions of 2018.

BUYER: Fifth Third
SELLER: MB Financial
DEAL VALUE: $4.6 billion
STATUS: Pending

Fifth Third in Cincinnati made a big splash with its first bank deal in a decade.

Its agreement to buy the $20 billion-asset MB Financial would be the biggest bank acquisition since Royal Bank of Canada bought City National in 2015. The deal also ranks among 2018’s biggest in terms of the premium: MB Financial is expected to sell for 276% of its tangible book value.

The $142 billion-asset Fifth Third will hold about 6.5% of Chicago’s deposits once the deal closes. Management also projects that the company will have a fifth of Chicago’s middle-market relationships.

“There were no other potential partners of the same caliber as MB Financial in the Chicago market,” Greg Carmichael (pictured), Fifth Third’s chairman and CEO, said in a release announcing the deal. “We view MB Financial as a unique partner in our efforts to build scale in this strategically important market.”

The acquisition has drawn some skepticism, largely due to aggressive cost-cutting plans and the roughly seven years it will take to earn back expected dilution to Fifth Third’s tangible book value.

BUYER: Synovus Financial
SELLER: FCB Financial
DEAL VALUE: $2.9 billion
STATUS: Expected to close in the first quarter

The purchase of FCB Financial in Weston, Fla., would also mark a return to large-scale M&A for Synovus Financial in Columbus, Ga.

The once-aggressive acquirer had been largely idle since the financial crisis; FCB would be its first traditional bank acquisition since 2006.

It was also one of the first major bank deals to be announced after lawmakers raised the asset threshold for becoming a systemically important financial institution.

The $32 billion-asset Synovus is poised to gain nearly $10 billion in deposits and 50 branches in Florida, a market that stung the company when the housing bubble burst a decade ago. Still, management stressed that it had learned lessons from that downturn.

“The real story … is that we have been very patient and very disciplined so that if the right transaction presented itself, we could act,” Kessel Stelling, Synovus’ chairman and CEO, said in an interview after the deal was announced. “We said it had to be strategically compelling and then it had to meet some very stringent financial criteria.”

Synovus, which agreed to a deal that valued FCB at 230% of its tangible book value, turned out to be FCB’s only bidder. One issue could have been FCB’s size. At $11 billion in assets, it had a limited range of banks that would have been in a position to make a deal happen.