So You Want to Buy a Bank: Seven Communications Tips for M&A in a Banking Crisis
In just a few weeks, the U.S. banking system has radically shifted. The sudden collapse of Silicon Valley Bank and subsequent regulatory response has been an immediate near-term drag on regional bank share prices and confidence in the regional banking system. Investors, customers, regulators and competitors are all evaluating the entire sector in a new light. That creates an opportunity for some to pursue M&A.
Pursuing banking M&A before a national banking crisis was hard enough. The process is always complicated with questions of regulatory review, political interference, strategic fit, execution risk and more. However, well-prepared, strong institutions will be ready to find opportunity in the market craze. The question these leadership teams need to be asking themselves is: how can I de-risk the road from announcement to close in the middle of a banking crisis?
Here’s our view on what to consider in your communications strategy for regional banking M&A in this environment:
Focus on alignment to strategic direction. The market views these assets as high risk, so it is important to emphasize a real ability to operate and manage what you’re buying.
Underscore that you see the risk. The starting assumption on any target is that it is a high-risk asset. That may or may not be a fair point of view, but best to recognize that as the starting point. As the acquirer, it is imperative that you underscore you have carefully assessed that risk and know you can manage it.
You’re not getting bigger, you’re getting better. People want to see the little guy win, not the big guys get bigger. Banking M&A is highly political and regulatory complex, so these optics matter. Underscore how the merger strengthens your ability to serve a wider customer base while maintaining a safe and sound regional bank for the economy.
Political interest is high, so be ready for anything. The recent bank failures have amplified political energy on banking. But banking to politicians can mean almost anything as they meld their key issues to the crisis at hand. Any banking deal will be in the spotlight in a big way which means the acquirer’s leadership team will be in focus. Be ready to be asked about anything related to the political and policy climate, including ESG.
Don’t bet on the political narrative holding steady. It is a bit of a trap to lean into the political energy of the day. Opinions and political narratives are just starting to unfold and tension is already heating up. One day it may feel that a regional bank deal should be applauded, the next though may seem like it should be jeered. This deal needs to make sense outside of the current moment and should avoid blatant attempts to score near-term political points.
Have a view on timing. Bank deals have been taking longer and longer to get done. The Biden administration has a renewed focus on antitrust, impacting and delaying routine mergers. Stakeholders will want to know how long you think the deal will take to close and how you came to that conclusion. Assuring the market on the path and your approach to address possible hurdles in the process will be key to communications.
Stick to the basics – jobs and the economy. There is a lot of noise about the stability of the banking sector right now. It’s easy to get caught up in debates about moral hazard and regulatory oversight, but it’s important to emphasize how regional banks are a vital source of local economies. Don’t forget to hit the basics in the effort to capture a transaction quickly.
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