Georgia's M&A market for banks was dormant for years, but a recent deal provides another sign that it is reawakening — this time for privately held banks.

It could be a good sign for private banks in other states that are looking to do deals.

The state of Georgia employed a so-called fairness hearing in a recent deal involving two privately held Atlanta institutions, Georgia Commerce Bancshares and Brookhaven Bank. The hearings are designed to protect nonaccredited individual investors in the selling company, says Bo Griffith, an attorney at Alston & Bird.

Accredited individual investors are generally considered to be those earning more than $200,000, or who have net worth exceeding $1 million on their own or jointly with a spouse.

The hearing law took effect in 2008, but it had not been used before this deal, Griffith says. After all, Georgia was a barren wasteland for bank mergers during the financial crisis, says Will Brackett, a senior vice president at Banks Street Partners.

"Up until the past year, there hadn't been a lot of open-bank deals in Georgia," Brackett says.

The fairness hearing does not replace the use of an investment bank's fairness opinion of the price the buyer pays. Both institutions used outside investment banks on the deal—KBW advised Georgia Commerce, and Banks Street Partners advised Brookhaven.

The state's fairness hearing is optional. Georgia Commerce and Brookhaven chose to employ the hearing, in part because it helped speed its closing, says Mark Tipton, chairman and CEO of Georgia Commerce.

Griffith and Mark Kanaly, both of Alston & Bird, advised Brookhaven. Steve Dunlevie, an attorney at Womble Carlyle Sandridge & Rice, gave legal advice to Georgia Commerce.

Georgia Commerce acquired Brookhaven for $24 million in cash and stock. With the state's blessing, Georgia Commerce received an exemption from federal law that would have required the company to register the new class of stock issued to acquire Brookhaven. The exemption saved Georgia Commerce thousands of dollars in fees, Tipton says.

Georgia's had some other bank deals lately. Those include the Hamilton State Bancshares, in Hoschton, Ga., deal for Cherokee Banking, in Canton, Ga.; and the Community & Southern Holdings deal for Verity Capital Group, in Winder, Ga. Both of those deals, however, were all-cash acquisitions and therefore would not have qualified for the state fairness hearing, Brackett says.

Other states, including Florida and North Carolina, also have optional fairness hearings for acquisitions involving privately held banks, says Lee Burrows, CEO of Banks Street Partners.

The law relates to a broader, long-running policy issue about how much protection unsophisticated investors need. The debate has taken on new life because of the rise of crowdfunding via the Internet and social media, and complaints by entrepreneurs that it is tough to get a loan these days.

Some states, including Georgia, have relaxed investment limits to make it easier for everyday, in-state residents to invest in local startups.

The Securities and Exchange Commission last summer lifted its ban on advertising private placements, as mandated by the Jumpstart Our Business Startups Act. However, investors still must meet the income or net worth requirements of accredited investors.

Such efforts have raised questions whether they inadvertently put desperate investors, and even their financial institutions, at risk. Just because someone meets the definition of accredited investors, does it mean "he or she is sophisticated — ready and able to make decisions about investing in private placements?" the head of a financial advisory network asked in a BankThink column last year.

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