The silence from the Federal Deposit Insurance Corp. was deafening, and Steven Wasson was starting to worry.

His company, Western Capital in Boise, announced a deal in early July to buy Regal Financial Bank in Seattle, and it had figured the deal would close in the third quarter based on its experience with a very similar transaction in 2012.

State regulators and the Federal Reserve gave the all-clear, but early this week, staring at a drop-dead deadline of Dec. 31, the bank's chief executive still lacked that last necessary approval. "We don't know why we don't have an answer from the FDIC," Wasson said on Wednesday. "Nothing has come up that says there is a problem."

Things suddenly changed Thursday. "We got the approval at about 8:15 this morning and plan to close at the end of the year," Wasson declared.

He was one of the lucky ones. There are a lot of bankers waiting for a similar sigh of relief in the final days of 2014.

The average deal this year is being completed within about 120 days after announcement, investment bankers say. Roughly 45 deals announced before July 31 — a little more than 120 days ago — were still pending in late November, based on the latest data provided by Keefe, Bruyette & Woods.

More than a dozen have the next few weeks to make good on their promise to close by yearend. Plenty of others had hedged against the average, predicting their deals would be finalized next year.

However, it is easy for things to go awry. There are several cautionary tales, many involving compliance snafus, that any banker considering a sale or acquisition should study thoroughly.

M&T'S Long Limbo

The most noteworthy (and longest) M&A delay over the last few years has been M&T Bank's effort to buy Hudson City Bancorp. Announced in August 2012, the deal has been up in the air since early 2013 when Buffalo, N.Y.-based M&T said that the Federal Reserve had ordered it to fix shortcomings in its Bank Secrecy Act compliance.

The deal's latest deadline is Dec. 31, but the company is staying mum on the likelihood of meeting it. M&T did not return a call for comment. Last month Rene Jones, the chief financial officer of M&T, declined to answer a question about when the deal might close during the BancAnalysts Association of Boston conference.

That deal has become the poster child for M&A delays, and some observers have speculated that the delay is one of the things spooking other larger banks from participating in M&A.

Beached in Miami

There are four deals still pending from 2013, too, including one in south Florida.

In May 2013, Chilean bank Banco de Credito e Inversiones agreed to buy City National Bank of Florida for nearly $900 million from Spanish company Bankia. The deal was set to close by the end of 2013, but observers say that the delay is unsurprising given that three countries are involved and the deal would mark BCI's entrance into retail banking in the U.S.

Lionel Olavarria, the CEO of BCI, said during a conference call to discuss its quarterly earnings late last month that it expected to get approval for the deal within 90 days, according to a report from SNL Financial.

A spokesman for City National echoed Olavarria's comments in a brief interview.

"We have every reason to believe we are in the final stages of the approval process," said Eddie Dominguez, director of marketing for City National. "It has taken longer than expected, but we believe we are still on track to close soon."

Impact of Protests

In considering deal applications, regulators must consider things like the financial impact, the needs of the community, the future prospects of the combined organization and the public benefits. Additionally, the public is allowed to submit comments, and the majority of the responses regulators receive address matters like the Community Reinvestment Act and fair lending, the Federal Reserve wrote last month in its semiannual report on banking applications activity.

Such deal challenges can dramatically change the timeline for deals. In the first half of 2014 the average time to process M&A applications that did not involve adverse comments was 50 days, the Fed said in its report. For those challenged with adverse public comments, the processing time ballooned to 212 days. Since 2011, the percentage of deals being challenged has ranged from 3% to 7%.

Challenged "proposals typically require additional time to allow the applicant the opportunity to respond to the comments, for the commenter to address the applicant's response and for the Federal Reserve to evaluate the merits," the Fed report said.

First American Bank in Elk Grove Village, Ill., had its deal to acquire Bank of Coral Gables in Florida delayed by such a challenge. That deal was announced in early May and was expected to close in the third quarter.

"There was a protest that was filed related to CRA and fair lending. We responded and our approval came," Christine Childers, associate general counsel for First American, said in a brief interview on Thursday. The bank got approval for the deal in late November and expects to close by yearend.

Warning to Sellers

While challenges by community groups are increasing, advisers say regulators' own agendas are also playing a major factor in delays. Regulators are using the pending merger as an opportunity to get the buyer to make operational and other changes. That is incredibly disheartening for sellers, especially those who thought they were careful in pairing with a buyer who had the ability to close.

"You can do great due diligence on the buyer, and have assurances on their standings with regulators, and the recency of their exams, and that ought to be of good comfort," said C.K. Lee, a managing partner at Commerce Street Capital, a Dallas investment bank. "There is a lot at stake for them when a delay happens. They've already told their employees and customers that they are selling. You can't unbreak that egg."

Lee is a former regional director of the Office of Thrift Supervision and said that there is nothing wrong with the regulators trying to strengthen compliance, but he just does not think the merger application process is the appropriate place for it.

"It needs to be dealt with in the exam process. I'm not saying some of these things don't have merit, it just needs to be addressed in the normal course," Lee said. "While you're tinkering with the buyer, you're interrupting the right of the seller to get out of the business."

In February the Fed sought to address the criticism that regulators were using the application process to effect change. It issued a letter that gave several detailed scenarios for holding up — or ultimately derailing — merger applications with the intention of adding transparency to the process.Since then, the number of merger applications that have been withdrawn — a good indicator of deals that were proposed, but doomed — fell to just five in the first half of 2014, compared with 19 for the first half of 2013 and 37 for all of 2013. (By comparison, the number of deals announced this year is up notably.)

Lee's comments were echoed by Western Capital's Wasson, who said his biggest concern had been for the seller, Regal Financial, when his deal seemed to be in limbo.

"It is a bank that is expecting to be sold, but now we are in a situation where it is the end of the year and they are trying to figure out if they need to think about things like employee benefits," Wasson said. "There is not a panic in the air, but anytime something gets delayed the sense of concern heightens slightly each day."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.