Editor’s Note: This blog post was adapted from our 2Q 2025 Commentary.

Following last November’s election, with President Trump retaking the White House and Republicans securing both houses of Congress, many expected a new wave of mergers and acquisitions (M&A). We shared that view. But instead of deal-making, companies stayed on the sidelines, largely due, we believe, to uncertainty around the trade war and the recently passed tax-and-spending bill.

We still think a major uptick in acquisition activity is likely, especially in banking, where scale matters more than ever. The need for advanced tech, sophisticated risk management, and regulatory compliance favors consolidation. Encouragingly, we believe there are some early signs that the regulatory environment may finally start supporting M&A activity instead of stalling it.

Source: Hovde Group

What Slowed Deals in the First Place

The prior administration wasn’t exactly M&A-friendly when it came to banks. As the Hovde Group recently reported, the average time to close a deal grew from 145 days (2010–2020) to around 190 days over the past five years, with some stretching out beyond 250 days.

Longer approval timelines tend to dissuade acquirers. Even for the most experienced buyers, extended periods between signing and closing invite more business disruption and expose deals to changes in the economic or rate environment, both of which can materially affect a deal’s value.

Signals of a Regulatory Shift

That could be changing. In a June 6, 2025, speech, Federal Reserve Vice Chair for Supervision Michelle Bowman addressed the need to streamline merger applications and reduce delays. She emphasized greater transparency, more efficient forms, and clearer timelines, all of which should make M&A more manageable and predictable.

Another tailwind: the Financial Accounting Standards Board (FASB) recently voted to end Current Expected Credit Loss (CECL) double counting, implemented between 2020 and 2023 in response to the 2008 financial crisis. In M&A, this resulted in banks being effectively penalized twice—once by being forced to mark loans to fair value and again as a result of being required to take a loan loss reserve for the same losses. We believe removing this duplication could make deals more financially attractive.

Bowman also flagged another critical obstacle: ratings. Under current rules, a single deficiency in any rating category could disqualify a large bank from being considered “well managed,” even if capital and liquidity were strong. Her July proposal aims to change that. Instead of penalizing banks over one rating input, the updated approach would take a broader view—one that rewards financial strength and doesn’t punish banks for pursuing strategic combinations.

Beyond these developments, there are broader shifts at play. For example, a proposal to loosen leverage restrictions on Global Systemically Important Banks could free up hundreds of billions in capital for these banks, further enabling deal activity.

In our view, conditions are finally turning favorable for bank consolidation.

We continue to favor banks with differentiated deposit franchises, conservatively capitalized balance sheets, above-average management teams, and prudent credit underwriting cultures—the attributes acquirers would also likely deem attractive, and if a new M&A cycle unfolds, we’re optimistic we are positioned to benefit.