Snapshot for week beginning 8 September. The pace of banking mergers and acquisitions (M&As) continues to pick up, with a flurry of deals hitting the press over the last week.
The dominant rationale used to explain M&A activity is that acquiring firms seek improved financial performance. now, several banking markets are over-banked, pressuring profitability. The global pandemic is now impacting the resulting low profitability.
This low profitability is now being hit by increasing credit costs and pressure on the revenue side with rates staying lower for even longer because of the Covid-19 crisis.
One possible solution here may be increasing the sheer size of operations. Bank mergers and acquisitions may target synergies especially on the cost side but also in revenues.
A bank could acquire an existing player with a strong enough market position to increase economies of scale and geographical diversification, among other things.
Or perhaps banks with matching geographical profiles could merge to increase their combined market share, find synergies and improve efficiency.
Acquiring better digital capabilities, extending customer base, improving product diversification, or perhaps improving the asset and liability match by merging with a complementing entity are other merger drivers.
Notable M&A deals of the week
Following are a handful of interesting deals that were in effect during the week.
Roundbank to Merge with Minnwest Bank
Minnwest Bank, which has branches in Marshall, Tracy and Slayton, announced this week plans to merge with Roundbank.
According to a press release, the two banks signed the agreement to merge. Completion of the transaction, which is currently expected to occur by the end year, is contingent upon regulatory approval.
Founded in 1987, Minnwest Bank is a family-owned bank with 32 branches throughout Minnesota and South Dakota, with $2.27bn in assets. Roundbank, originally chartered in 1881, is part of the Claire Erickson family of businesses.
The holding company for Roundbank is Waseca Bancshares. The bank was purchased from First Bank System (now known as U.S. Bank) by the Erickson family and local directors and management group in 1987.
Roundbank currently has four branches in Waseca, New Prague, Waldorf, and Farmington.
U.S. Bancorp to Acquire Bento Technologies
U.S. Bank has entered into an agreement to acquire Bento Technologies, known as Bento for Business, a fintech company based in Chicago and San Francisco that provides payment and expense management services to small and mid-size businesses.
The innovative Bento platform offers businesses simple and easy-to-use tools to better manage card-based payments and other expenses via spend tracking and card transaction controls.
The acquisition is part of the vision at U.S. Bank to bring payments and banking services together to simplify cash flow and money management for small businesses.
Bento’s accounts payable-based software complements the bank’s existing Elavon and talech accounts receivable software solutions, providing U.S. Bank clients a holistic one-stop experience for both their accounts payable and accounts receivable needs.
Rathangan & District Credit to Merge with Mountmellick Credit
Rathangan & District Credit Union Limited, has agreed to merge with Mountmellick Credit Union Limited. Both involved in the transaction are based in Ireland.
Both Rathangan & District Credit and Mountmellick Credit provide loan and services.
Members of Rathangan CU have been sent a booklet outlining the proposed “transfer of engagements” – a voluntary process which will see all assets, liabilities and undertakings of Rathangan CU transferred to the Mountmellick CU.
An accompanying letter states that the boards of both credit unions have voted in favour of the amalgamation and it “arises from the belief that our members can be better served together.”
It adds “we consider it an ideal opportunity to grow and develop our services to members locally” and “we are confident (this) will strengthen our position to be the most trusted and respected financial services provider for our members.”
All Rathangan staff members who are not retiring will transfer to Mountmellick.
Truist Bank to Acquire 100% Stake in Service Finance Company and Service Finance Holdings for $2bn
Truist Financial Corporation today announced that its wholly owned bank subsidiary,
Truist Bank, has signed a definitive agreement to acquire Service Finance Company, a leading national provider of point-of-sale (POS) financing solutions for the home improvement industry, for $2bn.
The acquisition of Service Finance expands Truist’s POS lending business, which currently includes Sheffield Financial, a leading POS lender in the power equipment, power sports, trailer and other consumer products segments.
Service Finance and Sheffield will serve more than 250 manufacturers, associations and other sponsors spanning approximately 29,000 contractors and dealers—making Truist a leading national provider of POS lending solutions.
Based in Boca Raton, Florida, Service Finance uses proprietary technology to deliver innovative payment solutions to more than 14,000 home improvement dealers and contractors, helping them provide prime and super-prime borrowers with financing for a wide range of home improvement products and projects.
First Financial to Acquire Hancock Bancorp
First Financial Corporation, the bank holding company of First Financial Bank and Hancock Bancorp, Inc., the bank holding company of Hancock Bank & Trust Company have jointly announced today the signing of a definitive merger agreement.
First Financial will pay $18.38 per share in cash for each share of Hancock’s common stock outstanding.
The aggregate value of the transaction is $31.35m. Upon completion of the acquisition, the combined company is expected to have approximately $5.0bn in assets, $2.9bn in loans, $4.2bn in deposits and 89 branch offices across Indiana, Illinois, Kentucky, and Tennessee.
First Financial expects the transaction to be approximately 7% accretive to earnings per share.
Latitude Group to Acquire Symple Loans
Latitude Group Holdings Limited has agreed to acquire Symple Loans for $200m in Latitude shares and cash, subject to regulatory approval, a news release said.
Symple is a Melbourne-based personal lending fintech using state-of-the-art global technologies, advanced analytics and proprietary risk-based pricing techniques to deliver simple digital experiences to customers and brokers, fast approvals and same-day settlements.
Symple will become the lending platform for all Latitude personal and auto loans, approximately 160,000 customers and a $2.5bn loan portfolio.
Latitude will leverage Symple’s platform to support its existing business, launch new products and build partnerships with other lenders.
Latitude will also expand its auto loans business into New Zealand and personal loans into Canada through Symple’s established North American operations.
The purchase of Symple is expected to accelerate growth in Latitude’s loan portfolio and reduce costs, with anticipated in-year synergies starting in 2HFY22 and growing to $32m before tax in FY23.
This equates to an in-year 9% cash NPAT accretion on the average of equity analyst forecasts for FY23.
The transaction is intended to be funded by the issue or delivery of 38.46m Latitude shares at $2.60 per share and $100m in cash.
Assuming a share issue, in-year cash EPS accretion is expected to be 5% higher in FY23 compared to the average of equity analyst forecasts. Symple’s founders will receive 23.5 million of the shares, escrowed for 2 years.