December 6, 2022

Bank Deals: It Turns Out That Not All of Them Move Like Glaciers

I worked on a number of bank deals over the years, and due to the regulatory approval process, all of them took a lot longer to close than almost all of the other deals I was involved with. My experience was far from unique, but a recent S&P Global article says that bank deals don’t always move like glaciers.  Here’s an excerpt with tips on how to close bank deals more quickly:

Conducting extensive due diligence on your merger partner to become familiar with their businesses and be aware of any potential issues that could arise is one way to help ensure a quick deal closing, banking attorneys said.

“Both the acquirer and the target should do their homework, and conduct diligence on each other to identify any potential hotspots,” John Geiringer, a partner in the Financial Institutions Group at Barack Ferrazzano Kirschbaum & Nagelberg LLP, wrote in an email. “Proactively addressing issues in advance with the regulators, such as asset concentrations, compliance weaknesses, and consumer complaints, can help smooth the path to approval.”

Another factor that plays into closing times is the purchase consideration, according to Matthew Veneri, head of investment banking and managing director of the Financial Institutions Group at Janney Montgomery Scott.

Cash transactions tend to close sooner because deals involving publicly traded stock require a review process with the U.S. Securities and Exchange Commission. Further, deals involving public banks buying other public banks require documentation that can lead to delays compared to private deals, Veneri added.

If a bank’s exam schedule coincides with a deal and there are unresolved topics from the exam, that might slow down approval, experts said. However, banks are unlikely to delay deals based on exam timing, said John Gorman, a partner at Luse Gorman PC whose focus areas include M&A.

The article says that during the period beginning January 1, 2021, the median time between signing and closing for bank deals involving targets with at least $500 million in assets has been 178 days, although much shorter periods are possible. In that regard, the article says that four U.S. bank deals completed since January 1, 2021, took less than half of the 178-day median to close, and six deals took under 100 days.

John Jenkins