It’s always fun to escape the dreary, late January weather and head to sunny, warm Phoenix to catch up with and learn from my peers at Bank Director’s Acquire or Be Acquired Conference (“AOBA”). This year the wintry weather back home resulted in a flight cancellation, allowed for an extra day of sunshine, and illustrated that most things have a silver lining if you can find it.

The 2023 version of AOBA felt bigger than ever, and it was good to see that conferences and large gatherings of industry peers can still thrive after the impacts of the pandemic. Below, I note a few themes from the conference and the sessions that I attended. For those who haven’t been to AOBA before, it is a two-and-a-half-day conference that has broadened its M&A offerings over the years to focus on a combination of M&A, growth, and FinTech strategies.

These themes stuck with me the most from the 2023 iteration.

Enhanced Focus on the Balance Sheet

We noted in a previous article that the 2023 deal-making outlook was challenged by the potential for heightened interest rate marks (i.e., unrealized losses in fixed-rate assets) and credit marks amidst a combination of a higher rate environment and a softening economic climate and real estate values. This theme was certainly present on the AOBA agenda as several sessions discussed the impact of unrealized bond losses as reflected in the AOCI (accumulated other comprehensive income) on banks’ balance sheets. But it also showed up in discussions of how asset sensitive vs. liability-sensitive banks will perform, the need for heightened due diligence on credit risk, and how these themes can impact capital planning, equity valuations, and M&A.

While the balance sheet theme was more prominent at the 2023 AOBA, this link between bank balance sheets, earnings, and ultimately valuation is not an entirely new phenomenon. It reminded me of one of my early bank readings as a younger analyst and how the text illustrated that banks’ balance sheets tend to drive earnings. It noted how this is a unique trait compared to companies in other industries, whose balance sheets have less of an impact on generating cash flow.

Deposits, Deposits, Deposits

Consistent with discussions around the balance sheets, rising interest rates, and the impact on the banking industry, deposits came up time and time again in sessions. These discussions covered strategies to retain business or consumer deposits, the attractiveness of core deposits for acquirers in the current environment, how to grow deposits organically, how to acquire deposits and pay premiums, rising core deposit intangible valuations, and how to provide your customers with the technology and digital banking solutions to onboard and retain deposits more efficiently. 1      

Digital Banking and FinTech Partnerships

We have previously discussed banks’ potential to leverage FinTech to create value and enhance profitability and efficiency. This theme seems to grow each year at AOBA as we see more sessions on structuring and performing due diligence on FinTech partnerships. I’ve also noticed an increased interest in topics like BaaS (Banking as a Service) opportunities, digital tools from different FinTechs, and case studies on how banks have developed digital strategies or partnered with FinTechs to compete and expand in the current environment. Additionally, the number of FinTech companies attending and presenting at AOBA continues to increase.

Opportunities were plentiful for those bankers interested in a demo or introduction to some of FinTech’s offerings. In my view, one emerging theme stood out a bit more from the rest: banks developing deeper partnerships with FinTechs and eventually investing with them as partners. We have noted how valuation issues and key performance indicators (KPIs) for FinTech companies and tech-forward banks can differ from traditional bank valuation methods and KPIs. I think it will be interesting to watch this trend going forward.

Scale Still Matters and M&A Remains a Strategic Priority for Many

While we noted the turbulence and potential headwinds for bank M&A in 2023, this could present an opportunity for some acquirers with a more long-term perspective. Traditional growth acceleration and inorganic scale strategies such as M&A were still prominent themes in many sessions, as they focused on the nuts and bolts of conventional bank M&A, valuation, due diligence, structuring, and integration. While certain themes change and evolve, the strategy to achieve greater scale and growth through M&A, and to enhance efficiency and profitability that create value over the long run, still persists.


We look forward to discussing these issues with clients in 2023 and monitoring how they evolve within the banking industry over the next year.  As always, Mercer Capital is available to discuss these trends as they relate to your financial institution, so feel free to call or email.

   1 For those who may have a deeper interest in this deposit theme, we did a deeper dive on deposits as a valuation driver for banks previously.  You can find it here.