Bank CEOs: Who is interested in buying your community bank?

Today we’re going to focus on who may be interested in buying your bank.

It sounds elementary, but the more people you have at the top of any sales funnel, the greater likelihood of a sale in the end. More than one potential buyer goes a long way in your efforts to getting a good price.

From my experience, it is important to wipe your mind as clean as you can to eliminate your own bias.

What bias am I referring to?

The natural competitive bias that says, “There’s no way we would ever be a part of that bank.”

Now is not the time for that.

It is way too early to start making your own assumptions to reduce or eliminate the potentially interested parties.

That time will come later, hopefully after you have several parties interested.

Your investment bankers will likely pull a list of potentially interested parties and will want to go through the list with you.

They are listening for that type of noise – comments made regarding what might or might not work.

They are listening to those comments for multiple reasons. We’ll go into those reasons in more detail in a later newsletter.

The primary thing they are listening for now, in my opinion, is to hear if there are any “non-starters” in the group. Somebody who has an issue that you won’t be able to get past, or perhaps your board won’t be able to get past, or possibly shareholders.

Investment bankers get paid upon success.

That’s a good thing. It keeps everything focused and moving.

As bankers, we have built our business on the understanding that time represents risk.

On a sale transaction – time is not your friend.

The investment bankers are listening for anything that represents a waste of time.

So, if there truly is a potential party that is a waste of time, let them know.

If not, keep every party in play at this point.

Again, it’s too early to think “That will never work.”

That includes credit unions.

I know, many banks spend a great deal of time and effort fighting against credit unions.

You should. Credit unions are a threat to shareholder value in the ordinary course of business.

However, this is a double-edged sword.

When it comes to selling, you have a fiduciary obligation to maximize shareholder value there too.

It trumps personal feelings. Your role changes.

Again, there may be something down the road in the process that eliminates credit unions, but at this point it is too early.

Unless there is a reason you can stand behind that protects you from breaching your fiduciary responsibilities of duty, loyalty, and care in maximizing shareholder value from not holding a meeting with an interested party. It’s important to keep an open mind.

There may also be a party that you believe would be the best fit ever.

You may hear from the investment bankers that the party likely won’t be interested.

Keep in mind, if your investment bankers are sell-side bankers, they are having conversations with many of the buyers on a frequent basis. They may have insights into the potential buyer’s capacity for a project in the time window you are attempting to go to market.

Don’t strike the party from your list completely, as time goes by things can change. Bring the party back up a little later citing the reasons you think it may be a good fit. The investment bankers will be happy to contact them. You may still get a “Not interested at this time” message, but you will be satisfied you tried.

If you are curious to do some research on the banks in preparation for a process down the road, pull a listing from the FDIC website of the universe of FDIC insured banks. Pick those that are roughly five to seven times your size as a good starting point.

At this point, don’t make any geographic exclusions. Get to know who the parties are on your list of potential buyers.

Start pulling articles about them.

Look at any acquisitions they have made recently.

Read the comments they have made about those acquisitions.

Have they referenced a larger plan they are trying to achieve? Like geographic markets, lines of business, etc.

Get curious.

Dig for any information on the leadership you can find.

Study their past.

It may be revealing.

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.