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I-bank breaking into hotly contested big bank deal arena

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I-bank breaking into hotly contested big bank deal arena

The financial advisers on CVB Financial Corp.'s pending $878.3 million acquisition of Community Bank included an investment bank with a history of landing larger depository M&A roles and another firm that is beginning to make more waves in the big bank deal arena.

Keefe Bruyette & Woods Inc., which is normally at or near the top of most bank deal league tables, is advising CVB on its Feb. 26 announced deal for Community Bank, which used D.A. Davidson & Co. as its financial adviser. For D.A. Davidson, the transaction surpasses its previous largest M&A assignment, which was advising Pacific Continental Corp. on its sale to Columbia Banking System Inc. in a January 2017 announced deal with a value of $644.1 million.

D.A. Davidson has been an active adviser in the U.S. depository M&A space, but historically many of its deals were valued at less than $100 million. However, since the start of 2017, D.A. Davidson has landed five transactions with a value of at least $100 million. It advised on only two deals in 2015 and 2016 combined.

Bigger deals tend to generate more revenue for i-banks because financial advisory fees are typically a percentage of the transaction's price tag. For the Pacific Continental deal, D.A. Davidson's engagement letter called for the i-bank to receive a fee equal to 1% of the deal consideration plus a payment for a fairness opinion, according to an SEC filing. Under those terms, the i-bank stood to earn around $6.7 million.

Landing financial advisory roles on U.S. depository deals over $500 million is especially noteworthy because there have been only 29 transactions reaching that threshold since 2015, and just 12 i-banks have landed spots on more than one of them. Sandler O'Neill & Partners LP has the most with 18, followed by KBW with 15.

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KBW also landed a sell-side role on the first bank deal announced in 2018 to top $500 million, Grandpoint Capital Inc.'s $641.2 million pending sale to Pacific Premier Bancorp Inc.

KBW has a history with Grandpoint and CVB. The investment bank advised Grandpoint on its 2013 acquisition of Gilmore Bank and on its attempted deal for NCAL Bancorp, though that agreement was terminated. As for CVB, KBW advised the bank on its 2017 acquisition of Valley Commerce Bancorp.

D.A. Davidson had not previously worked on a deal with Community Bank, but the bank has not been active on the deal front. Still, D.A. Davidson Head of Investment Banking Rory McKinney said he has known Community Bank CEO David Misch for more than a decade, and the relationship has been built throughout Misch's career.

In the 2000s, Misch served as director of corporate strategy and development with Mellon Financial Corp., which in 2007 merged with Bank of New York Co. Inc. to create Bank of New York Mellon Corp. Misch later became CEO of Private Bank of California and then was named CEO of Community Bank in 2014.

McKinney said D.A. Davidson had been helping Community Bank explore liquidity options for some time. The process resulted in a sizable transaction for the client and adviser.

"We're continuing to inch up the food chain working on marquee transactions in the United States in FIG world," McKinney said.