Why do community bankers use their gut feelings in making loans but neglect them when selling the bank?

A takeover deal is a marriage with no chance for divorce. The acquirer is king, no matter how much talk there is about "sharing authority and decision making."

Many a banker has arranged for an acquisition and then regretted it when veteran employees were laid off, policies toward loyal customers altered, and his own importance and relevance sharply downgraded.

All too often the problem stems from relying almost solely on the highest bid. The investment bankers come in and report that bank A's offer is worth more to the shareholders than bank B's. With careful due diligence and fear of lawsuits for ignoring the conclusions of the Wall Street people, the bank is sold on price alone.

But unless the deal is for cash only, the price depends on stability in the acquirer's stock. Too many community bankers have sold for stock that listed at, say, $50 a share, only to find it selling for half as much or less soon after the acquisition.

For the banker who is thinking of selling, the real question is what the buyer's shares will be worth over the long term.

Sure, the stock can be sold fast, and if it is still listed at $50, well and good. But remember, only one person can get through a fire escape at a time.

The key is to evaluate the paper and the people offering it. Getting four times book means little if the acquirer is paying with stock also selling at four times book. It's like the story (I know, I've used it before) of the boy who happily sells his dog for $1 million-not $1 million in cash, of course, but two $500,000 cats.

More important, since we deal with thin markets in bank shares, you have to investigate whether the potential acquirer has used window dressing- techniques that bury losses and boost profits only temporarily- to raise its price. That's like a woman losing weight to find a husband and then gaining it back once she gets her man.

Many still remember when Leasco Data Processing tried to take over Chemical Bank through a share-for-share offer. It didn't take too much selling of Leasco stock by friends of Chemical to depress the offer's value. The bid lost all takers overnight.

Good acquirers-the kind bankers want to sell to-worry about the people at the banks they buy and the communities that those banks serve.

Underwriters' "fairness opinions" seldom consider this. But underwriters make their findings, collect their fees, and disappear. The banker whosells out must live with the results.

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