Dissecting How Market Conditions Hurt M&A

Uncertainty after high-profile bank failures stalled talks for a Calif. bank merger and sliced the deal value by nearly 50%. But the transaction's underlying reasons prevailed.

Hello again, Bank Slaters!

We all know that M&A volume is down in the banking sector this year, reflecting high interest rates, unrealized securities losses, deposit pressure, lingering inflation, and fears of an economic cooldown (among other things).

Still, I find it interesting when you get a firsthand account of how these pressures negatively impact deal negotiations, pricing and timing. I’m impressed when banks stay in touch and return to the negotiating table based on a belief in a merger’s merits.

That’s what happened with Central Valley Community Bancorp and Community West Bancshares — both in California. Market uncertainty and plunging stock prices mothballed merger talks last spring, but they were able to strike a deal in October (albeit at a much lower deal value).

Here’s a look behind the curtain at this deal’s long and winding road.