7 Banks That Could Look to Acquire Another Bank in 2021

There has been a lot of talk that 2021 could be a big year for bank mergers and acquisitions (M&A), possibly making up for the lack of deals in 2020. The need for scale and to invest in digital capabilities has been thrust to the forefront of the industry like perhaps no other time in banking. Historically, the banks that sell are those that receive the premium. And while that's still true, management teams of acquiring banks are getting more disciplined, searching for deals that add immediate value to earnings and tangible book value on day one, or that have relatively short earn-back periods. Just look at the big share price gains of Silicon Valley Bank and First Citizens BancShares after they announced their recent deals.

There are several ways to purchase another bank, but the main two are through cash or stock, or through a combination of the two. In general, if a bank has a strong valuation, it will likely look to do some kind of stock deal in which it exchanges its shares for the selling bank's shares. With a high valuation, or what can be referred to as a strong stock currency, the acquirer gets a better exchange ratio with the seller and therefore would be able to issue less shares in the deal, which means less share dilution for existing stock holders.

Let's look at some of the banks that have expressed an interest in buying another bank this year, and also what their cash positions and stock currencies look like.

Source Fool.com