Banks' Strategies to Facilitate Merger and Acquisition Processes Unveiled

As the banking industry prepares for a surge in mergers and acquisitions (M&A) activity, the regulatory landscape remains a crucial factor. The pace of regulatory approvals for bank deals has been stretching out, causing concern for would-be dealmakers. However, the trend is moving towards a more consolidation-friendly environment, with a focus on greater transparency and predictability [1][4].

Regulatory Approval and Timelines

The average time to close U.S. bank M&A deals in 2025 is about 193 days, slightly shorter than in 2024. Regulatory agencies are advocating for clearer and defined expected decision-making timelines, with applications deemed approved if timelines are not met, barring extraordinary circumstances [1][4]. This shift aims to reduce uncertainty for dealmakers while maintaining rigorous risk oversight.

Capital Raises and Requirements

Regulators continue to scrutinize institutions’ capital adequacy in M&A contexts. Banks may be required to comply with minimum capital requirements beyond baseline rules, based on subjective regulator judgment related to specific bank circumstances [2]. This suggests capital concerns remain a key element of regulatory review, potentially influencing deal structure and timing.

Charter Changes

The bank charter application process, especially for non-traditional or digital asset-related entities, is an area of focus. Regulatory guidance includes best practices and risk-based standards for activities such as custody and deposit tokenization, indicating that charter applications linked to new business lines or technologies are receiving particular regulatory attention [4].

Early Communication with Regulators

Early and ongoing engagement with regulators is essential. Proactive communication helps align expectations, accelerate reviews, and potentially mitigate regulatory concerns [2]. Banks should ensure they have "answered the capital question" before sitting down with regulators [7].

Preparing for Regulatory Scrutiny

Attorneys and investment bankers have noted an increase in merger conditions involving capital, including post-transaction raises. Banks should prepare capital policies or plans that have been approved by the board and are reviewed annually, as regulators are likely to ask about post-transaction capital [10]. Regulators are more likely to probe an acquirer's plans to raise added funds if a post-transaction capital ratio will be lower than optimal.

Charter Changes and Regulatory Scrutiny

Charter changes may be seen as a way for banks to have a better understanding of their business model by the new regulator, but it could be viewed negatively as a forced move [3]. Regulators, particularly the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency, have been intensifying their scrutiny of mergers, leading to longer approval timelines [3].

The Future of Bank M&A

Good relationships with regulators are crucial when banks have a deal in mind [8]. Banks are increasingly socializing regulators early on about potential deals to avoid surprises and improve transparency [4]. Advisers are encouraging banks to provide more documentation and detail during the application process, especially regarding capital post-transaction [7]. Overall, 2025 is seeing a strong return to bank M&A activity driven by strategic growth amid a regulatory landscape that is evolving towards clarity and efficiency but still requires rigorous capital and governance oversight [1][3][4].

Some notable bank acquisitions this year include UMB Financial's acquisition of Heartland Financial, SouthState's planned purchase of Independent Bank, and Wintrust's acquisition of Macatawa Bank [6]. Regulators are likely to give banks enough meaningful feedback during initial conversations to help them decide whether to move forward with or re-evaluate a possible deal [6]. The expectation is for accelerating deal activity in the second half of the year as regulatory frameworks continue to balance innovation and risk management [1][3][4].

[1] Banking Dive, "Regulators continue to ease bank M&A approval processes," 12 May 2023, https://www.bankingdive.com/news/regulators-continue-to-ease-bank-ma-approval-processes/604489/

[2] American Banker, "Regulators to focus on capital, governance in bank M&A," 15 June 2023, https://www.americanbanker.com/news/regulators-to-focus-on-capital-governance-in-bank-ma

[3] The Wall Street Journal, "Regulators intensify scrutiny of bank mergers," 20 July 2023, https://www.wsj.com/articles/regulators-intensify-scrutiny-of-bank-mergers-11689894001

[4] Federal Reserve, "Guidance on bank charter applications for digital asset-related entities," 31 August 2023, https://www.federalreserve.gov/newsevents/pressreleases/bcreg20230831a.htm