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M&A: Why so quiet?

US bank consolidation is hanging fire; Will private equity firms jumpstart the market?

Given the dire state of the US banking industry through 2008 and 2009 so far, just why there has been so little M&A activity is a pertinent question. The number of US banking and thrift mergers and acquisitions dropped by more than half to 126 last year, and only totalled 52 up to June 19 this year.

To some extent, the US government’s Tarp programme is being held responsible. Richard Davis, chief executive of US Bancorp, says: "For those who took Tarp money, even without passing the stress test, there was enough capital to continue business. That backstop by the government meant that some banks were not thrown into the arms of others. While I am supportive of the government’s intentions with the programmes, the unintended consequence was a slowing in M&A activity. I think in the near term, every bank will still be around six months from now as a result."

Davis’s firm accepted Tarp money but subsequently paid it back. He says his firm might consider small pure banking acquisitions.

No burns
Elizabeth Nesvold, founder of M&A advisory firm Silver Lane Advisors, says Tarp only goes some way to explain the quiet spell.

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