M&T Bank’s deal to acquire People’s United Financial advances an emerging narrative for bank consolidation — bigger buyers landing bigger targets.
The $63 billion-asset People’s United spent considerable time and money building scale before agreeing to be sold to the $143 billion-asset M&T, which covets the Bridgeport, Conn., company’s markets and has the heft needed to make the $7.6 billion deal possible.
As bigger banks return to M&A, once-unthinkable deals like this are suddenly in play, industry observers said.
Expect more deals of that magnitude as banks look to offset a prolonged period of low interest rates and other challenges tied to the coronavirus pandemic, industry observers said.
The M&T-People’s United deal “reflects what I think are clear signals sent by bigger regionals that they are ready to start inking some deals,” said Robert Bolton, president of Iron Bay Capital in Rochester, N.Y. “This is the beginning of what I’m convinced will be a bunch of deals.”
The all-stock transaction, should it close by the end of this year as expected, would be the first bank acquisition for M&T since the Buffalo, N.Y., company bought Hudson City Bancorp in Paramus, N.J., in November 2015. That deal took more than three years to complete while M&T addressed regulators’ concerns about its anti-money-laundering controls.
Smaller banks have been bulking up for years, using M&A to add scale and enter new markets while creating a bigger midsize class. The number of banks with $30 billion to $80 billion of assets nearly doubled from 2014 to 2020, to 37, according to the Federal Deposit Insurance Corp.
CIT, People’s United and TCF are part of that group. CIT’s pending sale to First Citizens BancShares and Huntington Bancshares’ deal for TCF are scheduled to close by the end of June.
Low rates, an overabundance of deposits and tepid loan demand mean that the growth prospects for many banks — including large regionals like M&T — hinge on their ability to leverage capital and pursue acquisitions.
Bigger banks must pursue sizable targets to meaningfully “move the needle,” said Peter Winter, an analyst at Wedbush Securities. “You get a bank with more size … then you have a deal that has an earnings impact.”
For M&T, the decision to buy People’s United is more about the markets the seller entered and the businesses it nurtured, such as equipment finance, than its sheer size, President Richard Gold said in an interview.
The companies had been in touch for years, but Robert Wilmers, M&T’s former chairman and CEO, who died in late 2017, and People’s United Chairman and CEO Jack Barnes were never able to reach an agreement.
The relationship “remained cordial” before regaining momentum a year ago, Gold…