Financial services Capital markets and mergers and acquisitions: 2022 on the move | Manatt, Phelps & Phillips, LLP


2021 is on the books… another eventful year on so many different fronts. For financial institutions, it has been an eventful year, with various government appointments taking on new importance in the daily life of banks. Below, we’ve shared our top five takeaways of 2021 and what to expect in 2022.

1. Mergers and acquisitions are a big question mark. The market for bank mergers was very active in 2021, with in particular some very large transactions relating to the ongoing disposals of Bank of the West and MUFG Union Bank. Community and regional banks have merged in order to achieve economies of scale and to better compete with other banks and fintechs. But a few big question marks were thrown in what has otherwise been relatively smooth navigation for mergers. On July 9, 2021, President Biden signed the Executive Order on Promoting Competition in the United States Economy. The ordinance contains a general recommendation that the Attorney General, in consultation with the system heads of the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, review current practices and adopt a plan within 180 days for the “revitalization” of bank merger supervision to provide a more in-depth merger review. In his companion comments in executive order, the president noted that the United States has lost, over the past four decades, 70% of the banks that once populated the country and that federal agencies have not formally refused a bank merger request for more than 15 years old. In addition, he cited rising costs to consumers, restrictions on access to credit, and damage to low-income communities as direct by-products of bank consolidation. This effort, coupled with the departure of Jelena McWilliams following attempts by Democratic members of the FDIC board to force a review of the Bank Merger Act, means that at the very least, major bank mergers are running high. real risks of not being approved in a timely manner. . Whether this possibility will spill over into smaller acquisitions is an open question. At the community bank level, higher interest rates should improve margins and stock prices for use as bargaining chips in acquisitions.

2. The debt market will not be so hot in 2022. While low interest rates have prompted many banks and bank holding companies to take on debt as capital “just in case” to amortize their overall capital levels, the rise in interest rates coupled with the fact that most from issuers who had tapped into the debt market (and primarily subordinated debt) means the debt market will not be as hot in 2022 as it was in 2021. Look for more equity increases in 2022, but at slower levels than we’ve seen in the debt market.

3. Fintech partnerships with banks will continue to develop. We anticipate continued improvements in bank / fintech partnerships over the coming year as well as inevitable fintech congestion as fintechs seek to evolve in any way they can. Lots of discussions about whether or not we’re in a tech ‘bubble’ could bring banks and some established fintechs closer together, as both seek concrete business models with proven management teams. Fintechs will also have their own challenges in obtaining bank charters due to changes in leadership within banking regulatory agencies, including the Office of the Comptroller of the Currency, where a renewed emphasis on safety and soundness may discourage taking. of risks.

4. The big resignation can improve the quality of the board. Much has been written about how COVID-19 resulted in the “big resignation” – employees who changed jobs or left the workforce entirely. While potentially disruptive for employers, high-quality employees with more time can provide a rich experience in boardrooms, where unique skills are highly valued and more important than ever. Community bank boards are likely to no longer be exclusively composed of local business owners. Rather, boards should bring in experts with varying perspectives, ages and backgrounds in technology, data privacy, finance, economics, human resources and capital management, in addition to traditional advice. areas of expertise. Different voices enhance the depth of conversations on boards and ultimately lead to better managed institutions, which in turn increases shareholder value.

5. Invest in talent. Last year we wrote that the pandemic has taught us that good talent excels even under the most difficult circumstances. People who are able to adapt and find new opportunities to drive growth, even in unprecedented times, are essential to the stability, success and growth of an institution. This reality has been reinforced by the continued dislocation caused by COVID-19 and the feeling of “two steps forward, one step back” we all feel as we adjust more to difficult times. Financial institutions must spend resources not only to acquire the right talent, but also to continue to develop those talents so that they thrive in times of crisis and times of change. This type of training involves more than just subject matter expertise. Perhaps one of the lessons behind the great resignation is not only that people move from one job to another or quit, but that people may very well return to the workforce after a prolonged hiatus. Employers should view these potential hires favorably as rejuvenated employees, many of whom will be older, wiser and more dynamic contributors to a company’s culture. Those mid-career and senior talent professionals who have lived through the ups and downs of previous economic cycles and have been shaped by more personal experiences that only age can bring can be among the best resources.


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