An active dealmaker for more than a decade, BB&T Corp. did not slow its pace in honor of the new millennium. Last year the Winston-Salem, N.C., banking company unveiled five bank deals, and when the ink has dried on all the documents, BB&T's asset base will have grown to about $60 billion, according to John A. Allison, chairman and chief executive officer.
Not bad for a banking company that just 10 years ago was a small- fry, with assets of $5 billion.
But then dealmaking is something of a specialty for BB&T and for Mr. Allison, who, as chairman since 1989, has overseen most of the expansion.
BB&T's growth spurt really began in the 1980s, when bank executives saw an opportunity emerge from that decade's thrift crisis, as savings and loans ran afoul of having used insured deposits to engage in speculative real estate lending.
"What we did was pursue the healthy thrifts whose stock prices were tarnished because of the problems in the industry," said Mr. Allison, who is 52.
And BB&T has not looked back. On Mr. Allison's watch, BB&T has bought 51 community banks and thrifts, along with an impressive tally of 54 insurance agencies, not to mention 12 nonbank financial service companies.
"We treat mergers and acquisitions as a business line," Mr. Allison said. The bank has a 50-member team whose job is to focus solely on mergers.
One executive, Burney Warren, a BB&T executive vice president who reports directly to Mr. Allison, is charged with going on the road to scout banks in the region. "His job is to tell them the BB&T story," Mr. Allison said.
And according to Mr. Allison, most of the time the response is a favorable when Mr. Warren goes calling. "We are a friendly acquirer," Mr. Allison said. "We've never done and never will do an unfriendly acquisition."
Underscoring the bank's merger strategy is Mr. Allison's mandate that the company only pursue deals that make economic sense for shareholders. With that in mind, he said, he is determined not to get greedy and bite off more than he can chew. Indeed, Wall Street has praised BB&T as an acquirer with a "bite-sized" appetite, despite its slew of deals in recent years.
"They don't really follow other fads, and they never embraced the megamerger fad," said Marni Pont O'Doherty, an equity analyst at Keefe, Bruyette & Woods Inc. in New York.
The only complaint voiced by Ms. O'Doherty was that, with so many acquisitions, it's hard to keep current with the company.
"For short-term investors, it tends to be a lot to get to grips with," she said.
But Mr. Allison is not ready to give analysts who track his company a breather, at least not before it ranks among the top five banking companies in every state where it does business. BB&T executives have already indicated that they need to make another acquisition in Georgia, where they are only seventh-largest. And BB&T has yet to break into the top five in Tennessee, Virginia, or Maryland, said Jason Goldberg, an analyst at Lehman Brothers in New York.
In scouting for deals, Mr. Allison said, he never just looks for scale. "We don't care how big you are, we care how good you are," he said.
Though Mr. Allison said he would consider buying banks with assets ranging from $250 million up to $10 billion, most of the deals he has completed so far have been in the $500 million to $3 billion range.
BB&T's biggest deal last year - for One Valley Bancorp in Charleston, W.Va., which had $6.6 billion of assets - was also the company's biggest since its 1995 merger of equals with Southern National Corp. The One Valley deal extended BB&T's reach in West Virginia through the Charleston company's holdings of nine community banks.
BB&T's other deals last year were for smaller banks. At press time, it was due to close its acquisition of the $900 million-asset BankFirst Corp. of Knoxville, Tenn.
This quarter, the North Carolina banking company is expected to close deals for the $1.6 billion-asset FCNB Corp. of Frederick, Md., and for FirstSpartan Financial Corp., a $600 million-asset institution in Spartanburg, Va. Last month BB&T announced a deal for $1.6 billion- asset Century South Banks in Alpharetta, Ga., and the transaction is scheduled to close in the second quarter.
Though most of the company's transactions have been small, the sheer volume of deals has helped firmly plant the BB&T flag around the South. From its roots as a farming bank in eastern North Carolina back in 1971, when Mr. Allison came aboard, BB&T's expansionary tack has given it a presence from Maryland to Georgia and from West Virginia to eastern Tennessee.
"BB&T's goal is to be the acquirer of choice in its market," said David Stumpf, an equity analyst at A.G. Edwards in St. Louis. The company's "track record has been very good," he said. So far, the market has reacted favorably each time BB&T unveils a new deal, he added, but the worry is that it may not be able to grow without relying on relentless acquisition.
Mr. Allison calls the company's strategy of pursuing high-quality community banks and thrifts a success, and Ms. O'Doherty of Keefe Bruyette agreed, saying, "I think they've done a good job."
"They're one of those large-asset stories that maintain a community bank feel," she said.
Mr. Allison said the community bank atmosphere comes from retaining as many employees as possible from acquired banks.
Mr. Goldberg of Lehman Brothers said BB&T has been relatively successful in keeping job losses at a reasonable level after mergers. "The layoffs are a little below the industry average," he said. The company's "decentralized approach" also means its staffing level is relatively high, he said.
Mr. Allison said he will continue his bid to make BB&T a broader financial services institution through acquisitions. In particular, he is considering opportunities to add to his collection of small brokerage firms. During the third quarter, the company closed a transaction for Edgar M. Norris & Co., an independent broker-dealer in South Carolina, which it is merging into its Scott & Stringfellow unit.
On the insurance front, BB&T Insurance Services now ranks 11th- largest among bank distributors of insurance and will continue to buy agencies. However, Mr. Allison said he will stop short of acquiring an underwriter, at least for now.
"We have looked at the potential for buying an underwriter, but if you look at the returns, they're not very good," he said.
Meanwhile, Mr. Allison said he sees asset management as an area ripe for expansion. He anticipates doing a number of deals for boutiques that could be rolled into the company's recently created BB&T Asset Management unit. "We are focusing on trying to grow the asset management business, where we're small relative to our size," Mr. Allison said. "Our long-term goal is to make the asset management the same size as the bank."
That could mean a lot of acquisitions. BB&T's asset size, rapidly approaching $60 billion, dwarfs its assets under management, currently $11 billion.
Mr. Allison said the challenge does not daunt him. To keep a level head and philosophical outlook, he said, he spends his spare time reading the works of John Locke, Aristotle, and other great thinkers. For help in the day-to-day business of running one of the nation's most acquisitive banking companies, Mr. Allison said, he relies on a different kind of philosophy - treating people fairly.
Indeed, once each merger is done, Mr. Allison said, BB&T goes back to the acquired bank and asks how it could have managed the integration better.
"The challenge in mergers is maintaining revenue growth," he said. "And that's really about maintaining a personal relationship with clients, and if you don't treat the employees well that's not going to work."
