Smaller deals involving regional banks and wealth managers are driving acquisitions in the financial services industry, according to a clutch of industry watchers.

The deals reflect a broader shift away from mega-transactions and toward acquisitions that build capability and size, said Elyse Riley, a partner at EY.

“Our clients are looking at targets that are going to drive their growth agenda,” she said on Bloomberg TV today.

Earlier this week, Honolulu-based First Hawaiian Inc. announced it was paying $2 billion in an all-stock acquisition of California’s TriCo Bancshares. The merged bank would have about $34 billion in assets while significantly increasing First Hawaiian’s number of branches.

AI, and technology more broadly, is a key piece of the puzzle in financial services and for regional banks in particular.

“They just need to have scale,” said Margaret Tahyar, a partner at Davis Polk & Wardwell.

The key challenge facing deals is that there are more buyers than sellers, creating price mismatches that keep deal volumes lower than they could be, she added. That’s despite a seemingly open regulatory environment.

Carveouts from publicly traded companies represent a growing slice of activity, illustrating how large public companies are shedding non-core assets, according to Lightyear Capital Partner Natalie Ings.

In addition to regional banks, wealth management advisers are also seeing succession planning emerge as a structural driver of consolidation. Smaller independent advisers are joining larger platforms to shed compliance burdens and create career pathways for younger staff, Ings said. That adds a demographic dimension to what is otherwise a technology-and-scale–driven deal cycle.