Industry watchers say a wave of smaller transactions involving regional banks and wealth managers is fueling M&A activity in financial services. These transactions represent a move away from huge mergers toward purchases that enhance capabilities and scale, according to Elyse Riley, a partner at EY.
"Our clients are looking at targets that are going to drive their growth agenda," Riley stated in a Wednesday interview on Bloomberg TV.
Earlier this week, First Hawaiian Inc., which is based in Honolulu, revealed a $2 billion all-stock deal to acquire TriCo Bancshares of California. The structure of the deal - an all-stock transaction - reflects current market conditions where buyers often use their own shares as currency, partly because of valuation mismatches between acquirers and targets. This transaction expands First Hawaiian's presence on the mainland United States, reducing its heavy reliance on the Hawaiian economy.
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Margaret Tahyar, who is a partner at the law firm Davis Polk & Wardwell, commented, "They just need to have scale." She noted that the primary obstacle for deals is an excess of buyers relative to sellers, leading to price mismatches that suppress transaction volumes. This persists even though the regulatory environment appears accommodating.
Natalie Ings, a partner at Lightyear Capital, observed that carveouts from publicly-traded firms are a growing portion of activity, illustrating how major public companies are divesting non-essential business lines.
Beyond regional banks, wealth management advisors are seeing retirement planning become a key catalyst for consolidation. Ings said smaller independent advisors are merging with larger platforms to offload compliance duties and build career paths for younger staff. This adds a demographic element to a deal cycle otherwise fueled by technology and scale.
The trend toward smaller, targeted acquisitions reflects the realities of a market where larger bank mergers have faced increased regulatory scrutiny in recent years, even as the current environment is described as open. For many regional lenders, achieving the scale needed to invest in expensive artificial intelligence systems is a pressing concern, making bolt-on acquisitions an attractive path. Meanwhile, the aging cohort of independent wealth advisors is creating a steady pipeline of sellers, adding a structural tailwind to consolidation.
The combination of a favorable regulatory stance and technological necessity is expected to sustain this M&A activity.
The need for technological scale is particularly acute for midsize banks. They must compete with larger peers that already deploy sophisticated AI for fraud detection, credit scoring, and personalized marketing. Buying a smaller competitor with a modern tech stack can close that gap faster than building in-house, while also adding customer bases that boost data sets for machine learning models. This dynamic, along with the steady stream of wealth advisory firms seeking succession solutions, is likely to keep the deal pipeline active for the foreseeable future.
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