Bank Mergers: Who is sincerely interested in our bank?

For this newsletter, I am going to assume you have hired an investment banker.

I am also going to assume the board has chosen to go the route of “strategic approach” in going to the market. (For a refresher on the three types of approaches, see The Savvy Banker 005).

You plan on inviting more than one party, with one-on-one conversations taking place, with the goal of maintaining control of the competitive process along the way.

To begin the process, we’re just figuring out who might be interested in having a conversation.

There is a tendency to think too far ahead or to think too competitively at this point.

Try to avoid overthinking this.

You may have a thought of, “There is no way we would ever want to be a part of that bank.”

Perhaps you have been tough competitors over the years, and you can’t bear the thought of it.

Those fears might end up holding true in the future, but for now, it’s not the time to make that call.

Now is the time to be as open in your thought process as possible so you can have as many conversations as possible with interested buyers.

If you have hired sell-side bank M&A investment bankers, they are having conversations regularly with buyers and may have some insight into somebody you would have discounted or somebody who may be significantly larger but is trying to enter your market. (For a refresher on choosing an investment banker, see The Savvy Banker 026).

During this process, the investment bankers contact each of the identified potentially interested parties. They have a very high-level conversation with them about their appetite for an acquisition.

At this point, no names are provided.

Their conversations are handled in this fashion to protect your bank from widespread industry awareness that you are possibly interested in selling.

To describe the process, I am going to take you through the classic sales model of Attention, Interest, Desire, and Action (AIDA). This model will better illustrate where you are in the sale process.

• Attention: Before something can happen, you need to get the potential buyer’s attention.
  • Who are you?
  • Why should they listen?
• Interest: Just because you have their attention, it doesn’t mean they are interested. This is the stage where you are attempting to capture their interest.
  • What does this have to do with us?
• Desire: This is the stage where you are trying to take them from “I like this” to “I want”
  • How will this help make our lives easier, or better?
• Action: This is the goal where you are moving them into a stage where they are acting. They are moving from “I want this” to “I need”

The investment bankers have gotten them through the attention stage.

They have done this through their historical work with the potential buyer, along with the authority they have built over the years in the industry.

Without an investment banker to act on your behalf, getting a potential buyer’s interest on your own could prove to be very difficult.

Even harder trying to get the attention of several potential buyers.

The investment bankers are trying to move them to the interest stage.

As you can imagine, the stages of getting attention and interest are labor intensive.

The process is a lot of phone calls, emails, texts, and follow-up calls, follow-up emails, and follow-up texts.

There is a great deal of information gleaned by the investment bankers about the deal that is being discussed, but also in general about the potential buyer’s state of mind.

The message goes something like this:

“We have an opportunity for a possible acquisition by your bank in a major Midwest metropolitan market. The size of the bank is approximately $250 million. Focus is on C&I, working capital lines of credit, term loans, and owner-occupied real estate. Treasury management is also an area of focus. The management team is a strength, can aid in management succession, have CICs and Stay-Puts in place. The board is exploring strategic options, a sale being one of them as they understand the power of scale. Strong bank, good earner, solid team in a high-growth market that fits nicely with your footprint. We thought of you. Are you interested?”

That type of conversation builds goodwill with the buyer on behalf of the sell-side bankers.

 The buyer, if they are a serious acquirer, will want to think twice before saying no, to ensure they continue to hear about opportunities from the sell-side investment banker.

Both of those things help you.

The longer they stay in the process, the more opportunity you have.

The more potentially interested parties you have in the process, the better opportunity you have.

You want as many interested parties as possible at this point in the process.

Don’t worry about whether it is a strategic fit.

Figuring that out comes later in the process.

There also may be somebody you saw as the best fit in the world, and they passed.

You may be thinking, “If they only knew it was us!”

That may happen, but you can’t worry about it.

Just keep moving.

If you really want them to know, I encourage you to talk with the investment banker about a strategy for attempting to contact them a little further down the road.

You may also find out the reason they provided has nothing to do with you.

It has to do with them.

Keep moving forward.

What happens next?

We’re going to get further into the “interest” and “desire” stages next week on our path to “acting.”

If you can’t wait until next week, you can get my book “The Art of Selling Your Bank: A Bank CEO’s Step-By-Step Guide” available by clicking here. The next bit of information is in Chapter 17.

Action plan:

• How many banks can you list that are of an asset size that is five to seven times your size? Make a list. A potential buyer of your bank is likely to be in that list.
• How many CEOs do you know on that list?
• Think through the no-name message in this newsletter, how would your bank sound, using that paragraph as a template? This may point to things that possibly could be put into better shape.

“We have an opportunity for a possible acquisition by your bank in a _______________ market. The size of the bank is approximately $_____________. The bank focus is on __________________________________________________________. The management team is _________________________________________. The board is exploring strategic options, a sale being one of them as they understand the power of scale. [Strong] bank, [good] earner, [solid] team in a [high growth] market that fits nicely with your [footprint]. We thought of you. Are you interested?”

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.