Once the final terms have been agreed to, bank merger and acquisition deals rarely fall through. But lately there has been a flurry of second thoughts.
Bancshares of Florida Inc. pulled the plug on its deal for Horizon Financial. Carver is said to want to renegotiate its deal for Independence Federal in Washington. And PNC is getting more defensive about its deal for Riggs, though it says it still plans to get the deal done.
The reasons, as highlighted in this newspaper, are mostly changed conditions or fear of what new developments might bring.
That makes sense. I remember several cases of a solid bank buying itself a fatal problem.
Some time back what was then the largest bank in New Jersey agreed to buy one in the fast-growing city of Phoenix. Everything was set until the New Jersey institution sent out people to look at the assets.
They found land serving as collateral that was valued not at its present worth, but at what the Phoenix bank felt it would be worth in several years. The deal collapsed — and so, soon after, did the Phoenix bank.
But deals have been terminated for far less significant reasons. In one case, the seller wanted his bank to keep its name, but the buyer wanted his own bank’s name worked in somehow. End of deal.
In another case, the seller’s CEO visited the office of the buyer’s CEO. As the papers were being processed, the buyer’s president sat in his own next-door office looking at one piece of paper and doing nothing else.
His name was not even mentioned — that is, until his CEO yelled into the next office, “Charlie, would you get us each a cup of coffee?” He did and then went back to his desk.
The seller’s CEO told me he thought, “If that is the way he treats his president, how will I be treated when I sell my bank and become part of the staff?” The deal fell through.
Harry Keefe, the legendary analyst, told me of a merger he had arranged between two major institutions. As they sat in a club talking over the final details, the head of the seller asked, “How much did you earn per share last quarter?”
The buyer’s CEO responded, “I don’t know; I will have to call my CFO.”
That did it. “If that is the way he runs his bank, I want no part of it,” the seller decided. He pulled out.
Then there are mergers and acquisitions whose terms are all set until the seller’s board gets its shot. In several cases (maybe many) a director who has realized that the sale would cost him his job as the bank’s lawyer has talked the board into rejecting the offer. I heard that a Pennsylvania thrift was all set to be acquired by a major commercial bank — until the thrift’s board members realized they would no longer be able to go to the lush savings and loan conventions on the thrift’s tab.
That may seem trivial to you, but I guess it did not to the directors. They spiked the deal.
