Find a buyer by Labor Day.

That is the hottest tip in bank M&A. Community bankers worried about being taxed more than 15% on what they would earn from selling their bank better get a deal together by early September, investment bankers say.

Banks on the block would need a sales agreement by then at the latest to close a transaction before yearend, when Democrats in Washington are angling to roll back the capital gains and other Bush-era tax cuts, the experts say.

"That means get them announced," says Steven D. Hovde, the president and chief executive of Hovde Financial, an investment bank that handles community bank mergers. "For anybody that is now starting to focus on capital gains, it is almost too late to get deals — from start to finish — closed by the end of the year, unless it is a cash deal with a very large reputable buyer that can get approved quickly."

Hovde specializes in representing sellers. Factors that have pushed them to find a buyer include tepid loan growth, rising costs, narrowing margins and fatigue, he says. Few of his clients want to sell solely because they would rather pay 15% on their merger gains rather than the 20% or higher that is being weighed for top earners, Hovde says. But the prospect of higher taxes has people who have already decided to sell scrambling to beat the clock.

A typical deal takes two to three months to negotiate and four to six to close, he says.

The impetus to close before New Year's Day could influence the terms and conditions of some deals, he and another investment banker say.

That could mean more cash deals, which close faster than those in which only stock changes hands. More sales agreements could include drop-dead dates that enable the sellers to walk away if the deal does not close by Jan. 1. Firm time lines for filing regulatory applications and securing shareholder approvals could become more common, too.

John Adams, director of mergers and acquisitions at the boutique investment firm Sheshunoff in Austin, Texas, says capital gains concerns have not driven as many transactions this year as he had initially projected.

If the boom does not happen in the next six weeks or so, he says, it is unlikely to happen at all. "You are cutting it awfully close," Adams says.

Nobody knows for sure whether the tax will change, he says. Senate Democrats advocate raising the capital gains rate on the wealthiest, while House Republicans want to preserve the Bush-era cuts at all income levels.

"As you can imagine, a lot of these banks are owned by very conservative — politically conservative — people" who are pessimistic about the outcome of the debate, Adams says.

That tax rate matters because of the low multiples banks are trading at, he says. It may "take a couple of years to make up the difference" between how much bankers who wait to sell might get to pocket and how much sellers this year will keep, Adams says.

Healthy buyers in good standing with regulators have an upper hand in negotiations because of their ability to close deals swiftly.

"There are delays that can happen on the regulatory side," he says. "Maybe you can still get it done by yearend if you announce in September. But you can't bank on it."

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