Park National in Newark, Ohio, had been on the M&A sidelines for more than a decade — for a good reason.
The $7.5 billion-asset company agreed on Tuesday to buy NewDominion Bank in Charlotte, N.C., for $76.4 million in cash and stock.
The deal is Park's first since it bought Vision Bancshares in Panama, Fla., for $171 million. That acquisition, which closed just before the housing market imploded, was disastrous for Park, which struggled with credit issues before selling Vision four years later for just $28 million.
Things will be different this time around, even though Park is again hopping over some states to enter a new market, said David Trautman, Park's president and CEO. Trautman, who graduated from Duke University in Durham, N.C., has been interested in North Carolina for a while.
“We wanted to do something [small enough in] size where if everything went south and the proverbial black swan event happened, it wouldn’t consume us,” said Trautman, who was Park's president when it bought Vision.
Park was also careful to perform extensive due diligence on NewDominion, which included getting to know its management team. The company, for instance, bought a nearly 9% stake in NewDominion in late 2016 for $3.5 million.
“We wanted to ... find a way to get to know the people better,” Trautman said. “A lot of these things are done over a three- or four-day period. You do your due diligence and then you make a bid.”
The minority stake was available because NewDominion was looking for someone to buy shares held by NewBridge Bank in Greensboro, N.C. Yadkin Financial in Raleigh, N.C., bought NewBridge in 2015, then sold itself to F.N.B. Corp. in Pittsburgh.
NewDominion’s investment bank helped find Park.
Blaine Jackson, NewDominion's CEO, said he has gotten to know Park's management team over the last 18 months, through visits and phone calls. Park also observed NewDominion’s board meetings.
“We quickly realized there were a lot of common interests, beliefs, common core values," Jackson said, adding that Park had "a great management team."
Park learned other lessons from the Vision deal, said Damon DelMonte, an analyst at Keefe, Bruyette & Woods, who noted that the 2007 acquisition came at the worst possible time.
“Sometimes it’s better to go at a slower pace to make sure you understand what you're buying into,” DelMonte said. “The cards were stacked against them with the Vision acquisition. NewDominion is a deal that makes sense.”
The deal gives NewDominion, the last community bank based in Charlotte following a wave of deals involving North Carolina sellers, more lending capacity and access to new products and services, Jackson said.
NewDominion will keep its name, leadership team and board when the merger closes later this year. Park already has has 11 community bank divisions run by local leadership teams. The divisions share operational, technology, compliance and administrative resource.
When asked if Park has ambitions to expand elsewhere in the Southeast, Trautman said he has nothing planned. Still, Park is open to meeting with potential targets, though Trautman said he prefers the approach Park took with NewDominion.
“What we do have is an interest in finding great alliances with great people,” Trautman said. “If someone were to see that and say, ‘That’s interesting,’ we're always willing to listen.”
DelMonte said wouldn't be surprised if Park became a more active acquirer once the NewDominion deal closes.
"I do think this lays the runway for future growth opportunities, both organically and through M&A," DelMonte said.