M&A in the News
American Banker - 5/14/2012
The Power of the Heads-Up in Bank M&A
American Banker - 5/14/2012
Deals Cheat Sheet
American Banker - 5/4/2012
Clever Deal in Maine Gives Hope for Creative M&A
American Banker - 5/9/2012
PlainsCapital Deal Serves as Speed Bump to Texas Prices
In anticipation of the M&A Symposium, American Banker has asked our distinguished speaker to share their views on the M&A process and strategies.
Wilbur L. Ross, Jr.
AB: The bloom seems to be off the rose between private equity investors and banks. Last year, one investment pool returned more than $1 billion to investors, saying banks were no longer worth it. Some PE investors have drawn headlines for wanting to sell their interest in banks fast. You, by contrast, have stuck with banks, doubled down in some cases and encouraged the banks you have put money into to build out. What do you see that the other investor groups dont?
WR: FDIC assisted deals no longer have as attractive terms as when we bought Bank United and the restrictions on Private Equity funds investing in US banks also are more severe. We do believe that adding contiguous FDIC assisted deals to our existing regional platforms does make sense because they can eliminate virtually all of the over head of the acquiree. We also believe that the vast majority of the 6,000+ banks with $1 billion or less will find the combination of Dodd Frank and Consumer Protection so costly that they will sell out to regionals at big discounts. We therefore think that our platforms in Florida, New Jersey, the midwest and pacific northwest will be consolidators within their regions of accretive transactions. We also think that there will be more opportunities to acquire failed banks in Europe similar to what we have done with Bank of Ireland and Virgin Money-Northern Rock. The key though is management and the John Kanasses are few and far between. Finding the right CEO is a much bigger challenge than finding the capital.
AB: Last summer you said sellers has unrealistic expectations of how much their banks should go for. Has that changed since then, and if so, how much? Is that good or bad for banking?
RC: For the most part, sellers still have an unrealistic view of the value of their institution. Many still hope that the cyclical recovery of the banking industry will return us to the good old days. What sellers are missing in this outlook is the reality that the fundamentals of banking have changed. The increased regulatory costs, the over capacity of the branch network, the inability to leverage capital at prior rates - all of these issues will pressure the value of a banks franchise. But we are starting to see the light bulb go on for some sellers they are starting to grasp that the options for them are to face declining returns for their shareholders or look to partner with a bank that can leverage its size and market position to reduce costs, grow market share and increase returns to shareholders. And dont forget, there are a limited number of banks that are strong enough and have the support of regulators to help consolidate the industry. But this process of realization for sellers takes some time and education. Is that good or bad for banking ultimately it should be good.
AB: First PacTrust is one of Southern California's fastest-growing banks. You announced two big deals last year, for Gateway Bancorp (primarily a mortgage lender) and Beach Business Bank (primarily a commercial lender). How can growth-minded banks ensure they dont try to do too many things at once and structure their deals to minimize risks?
GM: Focus, the establishment of realistic expectations and a great deal of hard work from an experienced team of skilled professionals in growth strategies help mitigate risk related to acquisitions, says Gregory Mitchell, CEO of Frist PacTrust Bancorp on how growth-minded banks can minimize risk. Using a sequencing of integrations and conversions also are designed to mitigate operational, strategic or reputational risks. Consolidators must complete win-win solutions throughout an acquisitions entire value chain that includes employees, regulators, customers and local communities, as well as shareholders. The risk is losing productive and loyal staffers, great customers and the good will of the communities that the bank serves.