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Issues : M&A

Buying into trouble? Experts give their advice on FDIC acquisitions

May 25th, 2011 |

Buying a failed bank can be a brutal experience. There may be opportunity to grow your bank, but there also is risk and hard work to do in a short amount of time. Plus, all that work can feel like a waste, if you lose the bid to buy. As the final post in a series on FDIC-assisted bank acquisitions, we’ve summarized advice for those considering such a deal from the final session of Bank Director’s May 2nd conference in Chicago:

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Walt Moeling, partner in law firm Bryan Cave, says that bankers looking to do transactions “really need to focus on strategic planning in the big picture sense.”  Are you large enough to handle the acquisitions you want to do? If you double in size, how many people on your team have ever worked at a bank that size? “You can see banks struggling with the staffing issue two years out,’’ Moeling says. He also tells bankers to communicate regularly, or start networks, with other bankers who have done FDIC-assisted deals. If you run into a problem, they might have advice. Also, remember that communication isn’t great between all the different regulatory agencies. Don’t assume your regulator knows what the FDIC knows, and vice versa.

Jeffrey Brand, principal and an investment banker at Keefe, Bruyette & Woods, says figure out what the costs of bidding for a bank will be, emotionally and financially, and develop a team with clear responsibilities. “It’s a very intense, two-week period,’’ he says. “You get very invested in the process. You might not win (the bid), and you need to be prepared if the wind comes out of the bag.”

Rick Bennett, a partner at accounting firm PricewaterhouseCoopers, tells bankers that FDIC-assisted deals continue to be highly accretive to bank balance sheets. The more acquisitions a bank makes, the easier the process becomes. But some bankers underestimate the amount of people and resources needed to acquire failed banks. “Ask yourself, if I am successful, what does that mean for me from a resource perspective as well?” he says.

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Naomi Snyder is the managing editor for Bank Director, an information resource for directors and officers of financial companies. You can follow her on Twitter at twitter.com/naomisnyder or get connected on LinkedIn.

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