2 Smart Ways to Approach Your Needs for a Successful Bank Sale

Today, I am going to show you 2 of the smartest ways to address the needs of your:

• Shareholders
• Board of directors

As you move into the thought of selling, your mind will be racing. After all, this is new ground to plow, and you will have this weighing on you in addition to the demands of your current full-time role.

You may never choose to sell. But knowing how to assess these needs if the time should ever arise will give you confidence as you plan, communicate, and lead.

Knowing how to address these needs will help you avoid costly missteps, embarrassment, and miscommunication.

The reason most people struggle (or fail) with the thought of the selling process, is that they haven’t proactively planned for the process. They avoided thinking about it altogether (buried their head in the sand) and were left to react to whatever came next.

After all, it is like estate planning, dealing with your own mortality or at least vitality.

Here are some of the reasons why people delay making an estate plan:

• I’m too young
• I don’t want to think about death
• There won’t be any fight over my estate
• Estate planning is expensive
• I don’t have enough assets
• It’s a lot of work
• I don’t know why I need one

Everyone can come up with reasons not to do something.

I understand what your thoughts are, I have been there.

But it doesn’t have to be that way.

Plan.

Anticipate.

Be proactive.

It will take a load off of your mind and it will provide a great degree of confidence in your future choices and actions.

Avoid the needs of the shareholders, and board at your own peril.

What To Do Next:

1.  Consider the needs of your shareholders.

As a bank CEO, you are familiar with acting as a fiduciary.

We can all become “house blind” to the specifics of those duties.

As a refresher, those macro duties are:

• Good faith
• Care
• Loyalty

When acting in good faith, the primary motive is to advance the best interests of the corporation and shareholders.

To fulfill the duty of care, all material facts related to a proposed act or transaction and all information available should be considered before acting.

The duty of loyalty prevents directors from engaging in “self-dealing” transactions to gain improper benefit – financial or otherwise – from the transaction.

Additionally, you have many micro issues to consider regarding your shareholders’ needs.

Here are a series of questions to aid in stimulating thoughts around issues related to your shareholders' needs (this is by no means an exhaustive list of considerations):

• What does your current shareholder mix look like?
• Does your shareholder mix have high concentrations of ownership?
• Does your shareholder mix have family or families with significant concentrations of ownership?
• If so, are they removed from the founding of the bank and are no longer active in it, or are they still actively involved aside from the ownership?
• Would your shareholders be interested in exchanging their stock for that of a buyer or would your shareholders be more interested in cash?
• Are there share transfers in process or expected to take place soon?
• What reaction are you most fearful of coming from your shareholders regarding a sale?
• How did the most recent annual meeting go?
• Do you have patient capital, or is there a need for liquidity amongst your shareholders?

If you have a patient shareholder base with no current need for liquidity, great!

You still have fiduciary duties and a capital plan that requires you to be ready for liquidity, should the need arise.

Proactively build your plan to be able to execute if need be.

If it is not needed, you will meet your fiduciary duties and will sleep much better!

2.  Consider the needs of your board.

The primary responsibility of the board of directors, as fiduciaries, is to maximize shareholder value.

The board is looking to you to know:

• Are you taking the shareholders’ needs into consideration?
• What are the value drivers and detractors of the bank?
• What is the sales process and timeline?
• What are key deal terms and structures?
• What precautions are you taking to ensure the process will remain confidential?
• What role and value will an investment banker bring to the table?
• What does the current market environment look like for selling?

Proactively build relationships with investment bankers. In the six or seven years leading up to our decision to sell, we invited investment bankers to be guest speakers at our annual shareholders meetings.

It’s important to have investment bankers familiar with your bank in advance of any need.

It’s also important that you are as familiar as you can be with them.

Dig your well before you’re thirsty.

It was a great opportunity for our board to become familiar with the investment bankers and a great opportunity for our board, our management team, and our shareholders to understand the factors driving value, both from a macro and micro perspective.

Investment bankers also appreciate getting to know more about your bank, the board, management team, and your shareholders.

You may feel like you don’t have time to dedicate to these activities.

Make time.

You will be thankful you did when the time comes.

You’ve got this.

There are zero hacks or tricks in this newsletter. Just proven tactics that help you choose the right path for your bank.

Your path will:

• Inform your strategic plan.
• Guide your annual business plan and budget.
• Clarify priorities.
• Define your message so it can be communicated with confidence.

This is how savvy bankers navigate.

They build smart and valuable banks and choose the best time to sell – serving the needs of the shareholders and the board.

I hope you found this short lesson helpful.

What are your thoughts?

I’ll see you next week.