Capital raises supplemented i-banks' M&A advisory fees in 2024

A strict regulatory environment in 2024 produced a silver lining for investment bankers as banks in M&A transactions moved to raise capital to ease regulatory approval.

The bank M&A environment remains below historic averages, and some of the largest bank deals announced in 2024 included capital raises to supplement the acquirers' capital structures. Financial advisers benefitted from the additional capital raises because they provided the buyer's advisers with advisory fees on both the deal and the capital raise, Piper Sandler & Co.'s Bill Burgess said in an interview.

Including a capital raise in conjunction with a deal is a tactic that will continue in 2025, Burgess said. Even if the Trump administration eases regulatory scrutiny, as some expect, regulators always favor more capital.

"If you can confidently announce a transaction and know that you can raise $100 million, $200 million, $300 million of common equity in support of that deal, it emboldens acquirers, and it certainly is a lucrative assignment for firms like Piper Sandler," Burgess said.

Top advisory fee earners

Keefe Bruyette & Woods Inc. led financial advisers in disclosed advisory fees on US bank deals in 2024 through Dec. 17 with $70.7 million in disclosed fees, followed by Piper Sandler with $22.6 million and Raymond James & Associates Inc. with $18.9 million.

KBW advised on the five largest bank M&A deals of 2024 through November, and its advisory fees on three of those deals were among the five largest disclosed in 2024, according to S&P Global Market Intelligence data.

The firm advised Independent Bank Group Inc. on its pending sale to SouthState Corp., earning $25 million in advisory fees. It advised Heartland Financial USA Inc. on its pending sale to UMB Financial Corp., earning $19.9 million in advisory fees, and advised First Bancshares Inc. on its pending sale to Renasant Corp., earning $13.5 million in advisory fees.

Another of the largest announced deals of the year was WesBanco Inc.'s planned purchase of Premier Financial Corp., in which Piper Sandler advised Premier.

Raymond James advised some of the largest announced deals of the year as well. The firm advised the buy-side of both the SouthState-Independent Bank Group and WesBanco-Premier Financial deals, as well as advising Heartland BancCorp in its planned planned sale to German American Bancorp Inc., valued at $347.0 million at announcement.

Raising the bar

Capital raises supplemented the acquirers' capital structures in both the UMB Financial-Heartland Financial USA and WesBanco-Premier Financial transactions.

Such structures have been a change for financial advisers, Burgess said. The raises have provided the buy-side advisers with both the traditional merger advisory fee and fees associated with advising on the capital raise, he said. While Piper Sandler was not the buy-side adviser on UMB Financial-Heartland Financial USA or WesBanco-Premier Financial, the firm has handled other capital raises this year.

"When we're working with an acquirer, we're not bashful in saying, to the extent you want to supplement your consideration with a capital raise, we are ready, willing and able to do so," Burgess said. "The capital markets have loved it and all the deals that we've announced with capital have been well received."

Satisfying regulators

Pleasing both state and federal regulators proved difficult in some 2024 deals. HomeStreet Inc.'s planned sale to FirstSun Capital Bancorp was terminated in November after regulators blocked the deal.

Regulatory scrutiny is expected to ease under the Trump administration. Despite expected regulatory relief, Burgess said he expects capital raises to continue to be paired with acquisitions in the new year.

"If you look at the more profitable products for investment banks in general, selling common equity is at the top of the list," Burgess said. "Coupling capital raises with M&A is certainly a trend that we saw in 2024, and we would love to see that continue in 2025."