BMO’s Acquisition of Bank of the West

With 1.8 million more customers and a larger deposit base, the $16.3 billion acquisition strengthens BMO's presence in the US, especially in a high-growth area like California. With a 57% increase in U.S. deposits and a $80 billion increase in loans, the deal boosts BMO's total assets to $938.8 billion, which improves revenue streams and competitiveness in the market. Through cross-selling opportunities in capital markets, wealth management, and commercial banking, $670 million in cost synergies and nearly $1 billion in revenue synergies are anticipated. BMO paid a slight premium at 1.5x book value and 14x estimated earnings, which raises the possibility of longer-than-anticipated breakeven periods. Concerns regarding long-term value creation are raised by the premium, which has historically ranged from 1.2x to 1.4x book value in bank M&A transactions.

Merger Analysis -