Diligence crucial as M&A market heats up

Editor's note: This column was included in the Jan. 30 version of The Pulse, a weekly BankBeat newsletter sent to subscribers..A couple of stories we've written on M&A over the past week captured my attention and highlight the benefits of preparing to achieve scale through buying another financial institution. .In one article late last week, Richmond, Va.-based law firm Hunton Andrews & Kurth found that 2025 will likely be especially active for M&A amid rising CEO confidence and optimism that regulations will soften under President Donald Trump. ."The prospect for a more relaxed antitrust enforcement regime — or at least less distrust of business combinations — could create significant opportunities for strategic growth and investment," according to the law firm. .The report was released after a slow 2024 in M&A. As of the end of October, 106 whole bank deals had taken place, far fewer than the 250 deals completed annually from between 2012-19. Despite the recent slowdown, the promise of a softer regulatory environment and the long-standing reasons behind such transactions — succession challenges, increasing technology costs, rising fraud costs and scaling operations — are unchanged. Banks that are at least open to the possibility of growing through scale could find numerous opportunities to expand over the next several years. .Our piece on the M&A outlook was published three days before our Publisher and President, Tom Bengtson, flew to Phoenix for a three-day annual conference focusing on bank M&A. On Sunday, Jan. 26, Eide Bailly Accountant Michael Holdren said community bankers, at a minimum, should define an M&A strategy, discuss the possibility of an M&A on at least a quarterly basis, and conduct a self-assessment to see which obstacles could prevent the bank from a deal it might want to pursue..Holdren's comments are logical and show that banks should at least consistently review the possibility of M&A. Though economic and geopolitical crises could stymie activity in the coming year, there will still be willing M&A partners. Regularly reviewing your M&A strategy and fine-tuning your approach can open opportunities for your bank to achieve the scale you need while making it easier to find the right partner.