Wait till next year.
With last weeks wipeout among financial stocks, acquisition season for U.S. banks is closed.
Banks that were looking to be acquirers have almost certainly missed their opportunity for this year. And several that were able to squeeze mergers in before the sudden downturn such as Chase Manhattan Corp. and J.P. Morgan & Co. along with Firstar Corp. and U.S. Bancorp found themselves tied to the market whipping post in the wake of their announcements, as investors returned to the deal-shy ways that marked the early part of the year.
That again leaves the international set as perhaps the only market left for those looking to be acquired. It may also, theoretically, create a value proposition for opportunistic buyers looking to pick up a bank on the cheap.
On the other hand, those considering striking while a banks share price is low might also consider the costly experiences of North Fork Bancorp, whose bills from a months-long struggle to obtain local rival Dime Bancorp were tallied up on Friday. The total thus far: $5.2 million. In addition, North Forks results for the third quarter fell shy of Wall Street estimates, an unusual miss for what analysts consider a very well-run company.
To be sure, North Forks efforts were not totally in vain. The company successfully thwarted Dimes merger with Hudson United Bancorp. (In retrospect, it may have done Dime a favor given Hudson Uniteds subsequent earnings difficulties.) Still, the episode served as a reminder of just how difficult it is particularly in the financial services industry to carry out a hostile takeover.
In my experience, the outcomes in most have ranged from mediocre to disastrous, said Sullivan & Cromwell managing partner H. Rodgin Cohen, who advised Dime in its defense. While Dime had an array of tools in place to resist North Fork, one element stood out, he said.
The board was united, resolute, Mr. Cohen said. Give me a united board and I can defend against almost anything. A fractured board, and all the defenses in the world dont matter.
Rarely have boards, particularly at smaller banks, had their resolve tested with such regularity as in recent years.
A cottage industry of investor-agitators has roamed the community banking landscape, looking to root out opportunities for quick profits, essentially by buying in and then pressuring management to sell.
The element of surprise almost always plays into the hands of the instigators, Mr. Cohen said.
The offerer almost always has the early advantage of time, to prepare their story and communicate it, he said. I learned very early that simplicity is important. Make sure one guy wears the black hat and one guy gets the white hat.
In the Dime and North Fork standoff, the early edge went to North Fork chairman and chief executive John Adam Kanas, who painted his Dime counterpart as stubborn and resistant to reason. But when Dime brought in a new chief executive, Anthony Terracciano, who is considered an expert at turnarounds and who quickly announced a series of moves aimed at streamlining its operation, the advantage shifted. Dime itself was seen as taking the initiative, and Mr. Kanas never regained the high ground.
But the fight is not technically over. Mr. Kanas is still seeking to have a slate of nominees voted on to Dimes board at its next annual meeting, though without an offer on the table it is unclear how hard that issue will be pressed. Given the climate for bank stocks and the expenses North Fork absorbed in its first overture, it may be a long time before Mr. Kanas again comes calling.
Has either company been so weakened by the ordeal that it is vulnerable to a new bidders entry? Given FleetBoston Corp.s obvious interest in the regional market it partnered with North Fork early in the fight its name emerged quickly as one ready to sweep in.
But because Fleet later agreed to buy Summit Bancorp in New Jersey, such an endgame is unlikely unless there is a sudden change of heart in the executive suites at Dime or North Fork.
Banks are almost always sold because the CEO decides to sell, Mr. Cohen said.