The top mergers and acquisitions (M&A) deal of April 2016: Two pawn giants merge into one of the largest-ever pawn operations in the Americas.
Other than that, April was by far this year’s slowest month for large M&A deals between financial companies. While deals between community banks with less than $300 million in assets were a bit more plentiful, there were less than a handful of deals worth mentioning on this month’s M&A list.
The deal slowdown wasn’t limited to just the financial sector, though. As I mentioned in a recent post, the largest investment banks are suddenly witnessing a soft M&A market across all sectors as low oil prices, recession fears, and stalled growth in China and emerging markets led to fewer deals being made between companies.
As analyst Richard Bove of Rafferty Capital recently opined, deal making only flourishes when CEOs “feel confident that if they buy another company, it is going to be accretive to earnings at some point if not in one year, in the second or third year. It’s difficult to have confidence at the present time.”
That said, there were still four M&A deals worth noting for April 2016:
Pawn Domination in the Americas: First Cash Financial Buys Cash America International
Late last month, two of the largest US retail pawn operators, First Cash Financial Services and Cash America International, agreed to enter a “merger of equals” deal to form the new $2.4 billion FirstCash company.
First Cash Financial agreed to pay $994 million in stock to buy Cash America International, which would combine First Cash Financial’s large store count in Mexico and presence in Guatemala and El Salvador with Cash America’s large store count in the US. The result will be one of the largest pawn store networks in the US and Latin America, with more than 2,000 stores across four countries (including around 1,240 US shops and 705 shops in Mexico). The deal would also move Cash America back into Mexico for the first time since 2014, when it exited the market after selling its 47 Cash America casa de empeño stores there to focus on the US market.
Annaly Capital Acquires Hatteras Financial to Diversify Mortgage-Backed Portfolio
New York-based real estate investment trust (REIT) Annaly Capital Management agreed to buy North Carolina-based Hatteras Financial Corp for $1.5 billion. The deal, expected to close in the third quarter of 2016, will expand and diversify Annaly’s portfolio, which is made up of mostly fixed-rate, mortgage-backed securities, by adding Hatteras’ portfolio of mostly adjustable-rate, mortgage-backed securities.
United Community Banks and Pacific Continental Expand into New Markets
Early in the month Georgia-based United Community Banks expanded into key markets in coastal South Carolina after agreeing to buy Mt. Pleasant-based Tidelands and its seven Tidelands Bank branches in the Charleston, Myrtle Beach, and Hilton Head areas. The deal is expected to close in the third quarter of 2016.
In another bank deal, the $1.9 billion-asset Pacific Continental — which owns Pacific Continental Bank in Oregon — expanded its reach further into the Seattle market after agreeing to purchase $422 million-asset Foundation Bancorp in downtown Bellevue, Washington.
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Christian Hudspeth is a company analyst for Dun & Bradstreet who researches and reports on more than 1,000 banks and financial firms for Hoover’s company database subscribers. Before joining Dun & Bradstreet, Christian was a managing editor, senior financial writer and analyst for a financial publishing company. His financial articles have been featured on MSN Money, Business Insider, Nasdaq.com, and several other well-known online publications. Before he was an editor, Christian worked in the commercial banking industry for seven years.
Photo courtesy of First Cash website.