Strategic Patience in a Shifting M&A Landscape
The U.S. banking sector, long weighed down by underperformance and investor apathy, experienced a notable spark of M&A activity in the latter half of 2024.
This revitalization was the focus of a conversation between Josh Nolan, Managing Director of Equity Capital Markets at D.A. Davidson, and Jason Hach, Managing Director of Financial Services at Piper Sandler, both based in New York City. Together, they analyzed the current M&A status under Travillian host and Principal, Head of Bank Strategy, Mike Perito.
Capital Inflows and Market Optimism in Bank M&A
Nolan characterizes the sudden M&A resurgence as driven by investors craving a “catalyst” to re-engage a beleaguered sector. “The sector had been so unloved,” Nolan explains, “that investors really honed in on this strategy of coming in alongside management in an M&A trade,” where deals offered not only scale and efficiency but also meaningful upside from balance sheet accretion amid a favorable rate environment.
Hach echoes the sentiment, noting that broader macro and political events helped accelerate the activity. “When Biden dropped out [of the presidential race] in July, optimism surged,” he says. He cites the timing of the high-profile WesBanco/Premier deal—a billion-dollar transaction with hundreds of millions in capital raised—as evidence of the upturn.
According to Hach, that wave hasn’t entirely passed. In April 2025, he notes, the market still saw both mega-deals and small transactions coast to coast, signaling the “early innings of a pretty good consolidation wave.”
Pipeline Prospects and the Regulatory Wall
While the volume of deal activity has cooled slightly since that post-election rush, both experts see encouraging signs. Nolan, however, highlights a persistent supply-demand mismatch: more would-be sellers than buyers, with serial acquirers constrained by what he termed a “regulatory wall” once they approach $25–50 billion in assets. “Allowing larger institutions to start acquiring again is probably the key to unlocking valuations throughout the bank ecosystem,” he asserts.
The constraint isn’t just regulatory. It’s philosophical. “You reach a point where building scale for scale’s sake doesn’t make sense anymore,” he adds. Unleashing deal flow, then, depends not just on appetite but on clarity and consistency from federal regulators—something both Hach and Nolan agree is slowly improving.
Bank Capital Raising: Preferred Instruments & Market Realities
The duo also explored capital adequacy in a post-SVB environment. “From a regulatory perspective, we’re well capitalized,” Nolan says. “But if you look at how we value the industry, and what investors focus on—like compounded tangible book value growth—it was clear we were underappreciating mark-to-market realities until it was too late.”
Capital raising, then, is about structure and timing. While common equity remains “king,” Nolan notes a growing appetite for preferred instruments, particularly as some banks seek to avoid the higher costs associated with sub-debt resets. Hach elaborates: “Deals that were issued in the threes and fours are now resetting in the eights,” prompting a reevaluation. Some banks, especially those above $10 billion in assets, are seeing the value in preferred stock. “We were involved in the Wintrust deal this week,” Hach says. “There’s been such a lack of supply, and pricing is attractive—basically on top of tier-two.”
The good news? “There’s a lot of money on the sidelines waiting to invest in bank stocks,” Hach notes. “Portfolio managers are underweight banks, and with forecasted double-digit earnings and revenue growth, it’s hard to stay that way much longer.”
The Sellers’ Dilemma and Buyers’ Selectivity
As for why banks are selling, Nolan keeps it succinct: “Age of the management team. And exhaustion.” Hach offers a more nuanced view. Public banks, he says, are driven by shareholder value. “They realize they can’t generate the returns a larger bank can, so they seek partners.” For private banks, the motives are more personal—succession issues, capital constraints, or an unfixable regulatory problem.
Meanwhile, buyers have become pickier than ever. “They’re being very selective,” Hach says. “They lay out an ideal candidate profile. And if target #10 becomes available, they still ask: Should we wait for #1, #2, or #3?” The scarcity of buyers and the premium on strong deposit franchises mean no one wants to overpay for mediocrity.
Conviction Over Uncertainty: The Psychology of Deal Execution
Perhaps the most consistent theme throughout the conversation is the importance of conviction in navigating uncertainty. Deals often fall apart, not because of poor strategy, but due to hesitation.
“Every good deal probably fails two or three times because of market gyrations,” says Hach. “You’ve got to have the fortitude to move forward.”
Nolan agrees, particularly in the capital markets. “To the extent you’re thinking about doing something, it doesn’t need to be binary,” he advises. Whether through non-deal roadshows or confidentially marketed follow-ons, banks can explore capital strategies without full public exposure.
Challenges for Small-Cap Banks in Today’s Market
For small community banks, the challenge lies in visibility. “It’s not the same investor landscape it was 10 years ago,” Nolan admits. The S&P has outpaced the banking indices three or four times over the past two decades, and few institutions—outside of giants like JPMorgan—have bucked the trend.
Still, Hach advises smaller institutions to focus on what they can control. That means focusing on tangible book value growth and EPS, even if the market doesn’t immediately reward it. Long-term value is still real value.
“There’s a need for more M&A from the smaller names,” Hach adds. “The $200 million market cap bank has to look at acquiring the $400–$500 million peer. That kind of downstream consolidation may be what reignites investor interest.”
Strategic M&A: Readying for the Next Wave of Consolidation
Nolan and Hach make it clear: Despite volatility, the fundamentals for consolidation remain intact. Regulatory relief, though still being tested, appears to be moving in the right direction. Capital is available, though not always at preferred pricing. The deal funnel is filling, but conviction, preparation, and selective targeting are more crucial than ever.
“We’re seeing a rotation,” Nolan concludes. “New capital providers are stepping in. The ecosystem is evolving. The opportunity for capital formation is real—if you’re ready.”
For banks seeking relevance and growth in today’s uncertain environment, it’s less about timing the market and more about being ready when the window opens. As both experts agreed, the sector’s next M&A wave will reward those who planned thoughtfully, acted decisively, and remained focused on long-term value.
The complete future of bank M&A discussion among Nolan, Hach, and Perito can be found on the Travillian Next website.
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