The New Bank M&A Paradox

(TheStreet) -- Bank consolidation is poised for a rebound, but getting a deal completed will become even more difficult for the foreseeable future. Regulators will be combing bank acquisition agreements with fine-tooth combs to carefully examine the impact of a deal on the acquiring institution, something that started as the financial crisis hit but will only increase as the financial reform measures are implemented in the coming months. Meanwhile, deal premiums - if any - will be significantly lower as buyers look to find acquisitions that are quickly accretive to earnings, observers say. Selling banks will have to rethink pricing, period. The heady days where some bank acquisitions reached as high as 4 times the seller's book value are unlikely to return, particularly in a low-growth environment. "What you have is a bid-ask spread where buyers are ready to do things, sellers are not quite there yet," says John Chrin, Lehigh University's Global Financial Services Executive-in-Residence and the former head of JPMorgan Chase's financial institutions' M&A group. "You still have differential in price expectations, which is why [the First Niagara FNFG deal, with a 24% premium] is encouraging. ... But it's not going to be something that's going to be a catalyst to have a lot more deals happen," Chrin says. So far 113 bank acquisitions have been announced this year, according to SNL Financial, with First Niagara purchasing New Alliance (NAL) for $1.6 billion by the largest. As of August 31, the average deal price to book value was 1.09 times book, down from 2.24 times book in at the height in 2006, according to SNL. To read the rest, head over to TheStreet.com