Expand Your Buyer Pool: 5 Smart tips for identifying potential community bank acquirers
Let's talk about something that trips up many bank CEOs when considering a sale: limiting your potential buyer pool too early in the process.
Here's a fundamental truth about any sales process:
The more qualified prospects at the top of your funnel, the better your chances of getting maximum value at the end. It sounds obvious, but I've seen too many CEOs sabotage their own process before it even starts.
Check Your Competitive Bias at the Door
First, let me address the elephant in the room: that voice in your head saying, "We would never sell to them."
Stop that. Right now.
It's too early in the process to let your competitive instincts eliminate potential buyers. Those instincts serve you well in day-to-day operations, but they can work against you during a sale process.
Working with Investment Bankers: The Early Stage
Your investment bankers will come to you with a list of potential buyers. When reviewing this list with them, understand what they're really listening for:
- True Deal-Killers
- Regulatory obstacles
- Insurmountable board objections
- Fundamental shareholder concerns
- Time-Wasters
- Remember: Investment bankers get paid on success
- They want to focus energy on viable prospects
- They're trying to identify genuine non-starters
The Credit Union Conundrum
Here's a controversial topic that deserves honest discussion: credit unions as potential buyers.
I get it.
You've probably spent years:
- Competing against them
- Pointing out their unfair advantages
- Fighting their expansion
But here's where your role changes:
Your fiduciary duty to maximize shareholder value trumps competitive history.
Unless you have a concrete reason that stands up to fiduciary scrutiny (duty, loyalty, and care), you need to keep credit unions in the mix at this stage.
The "Perfect Fit" Trap
On the flip side, you might have a dream buyer in mind.
But your investment bankers might tell you they're not likely to be interested.
Listen to them.
Here's why:
- Sell-side bankers talk to buyers constantly
- They know buyers' current appetite for deals
- They understand buyers' strategic priorities
- They're aware of buyers' operational constraints
That said, don't permanently strike anyone from your list.
Circumstances change.
Keep dream buyers in mind for later discussion if you have specific reasons why they might be a good fit.
Do Your Own Homework
Want to get ahead of the game? Here's how to start your research:
- Build Your Initial List
- Pull FDIC data on insured institutions
- Focus on banks 5-7x your size
- Don't limit by geography yet
- Create a broad initial universe
- Study Their Moves
- Recent acquisitions
- Stated growth strategies
- Geographic expansion plans
- New business line initiatives
- Research Leadership
- Executive backgrounds
- Public statements
- Strategic vision
- Integration track record
- Look for Patterns
- Preferred deal sizes
- Market entry strategies
- Post-merger integration approach
- Treatment of acquired teams
Smart Questions to Ask
When evaluating potential buyers, consider:
- What's their stated growth strategy?
- How do they handle post-merger integration?
- What's their track record with previous acquisitions?
- How do they typically structure deals?
- What's their approach to retained talent?
Next Steps
- Start Your Research
- Pull that FDIC list
- Create a tracking system
- Begin gathering articles and information
- Stay Open-Minded
- Park your competitive instincts
- Think like a shareholder
- Consider all viable options
- Prepare for Discussions
- Document your findings
- Note specific strategic fits
- Keep track of questions
The Bottom Line
Remember: At this stage, your job isn't to eliminate options – it's to expand them.
The time for narrowing the field will come later, hopefully when you have multiple interested parties creating competitive tension.
Get curious.
Do your homework.
And most importantly, keep an open mind.
Want to dive deeper into evaluating specific types of buyers? Let's continue the conversation.
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 on a timeline of their own choosing – 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.
