Joseph Silvia

Gaining approvals from state and federal banking agencies is not supposed to be the most complicated part of the M&A process, but it can sometimes feel that way. There are timing requirements in the merger agreement, the statutes and the implementing regulations that must be addressed. Those include everything from the filing deadline to the timing of the earliest approval based on the public announcements published in local newspapers.  Here are a few of the not-so-secret secrets to making the regulatory process as smooth as possible.

1. Reach Out to Regulators Proactively
Applicants don’t always like to contact regulators in advance of an application, but early outreach can be helpful for several reasons. First, when a public notice is required about the transaction, a draft notice can and should be shared to confirm its adequacy before it is published. Nothing stings like having to republish because the first publication doesn’t meet regulators’ expectations.

Second, while substantive documents do not need to be shared early, providing regulators with a simple overview of the transaction can help analysts prepare for the filing. This makes their jobs a little less stressful when the application is filed because they already know who needs to be pulled in for its review.

Finally, it can help from a simple relationship perspective. Getting some advance notice allows the applications group to prepare for the filing (along with all the others they receive). Making their jobs a little easier can make the application process easier, as well.

2. Don’t Pre-File Unless the Deal is Novel
In 2012, the Federal Reserve issued SR Letter 12-12, which outlined a pre-filing process that allows an applicant to request feedback on a potential merger, acquisition or other transaction prior to submitting a formal application or notice with the Federal Reserve.

This process was touted as helpful for those that are unfamiliar with the application process or have some novel aspects in their proposal, such as a significant change in entity or individual ownership or in the bank’s post-transaction business plans.  The process is useful for novel proposals, but outside of those situations, it typically only lengthens the application process. Transactions without novel or unique components need not bother with the pre-filing process.

3. File a Comprehensive Application.
The goal is always to get things right the first time, but filing a complete and accurate application and filing a comprehensive application are not necessarily the same thing. For example, applications analysts put a lot of focus on the financials, so making the financial statements and notes to the financial statements as comprehensive (and readable) as possible can help expedite the process.

Similarly, when reviewing the statutory factors around post-transaction management and board composition, giving analysts information about that goes beyond simple resumes or website bios can help avoid unnecessary back and forth. Either way, when drafting an application, look closely at the statutory factors that analysts need to submit to their superiors, and go a little further in what you provide them to conduct their review.

4. Utilize Outside Experts.
The use of outside expertise can be critical to a smoother application process. While it may seem like a simple transaction shouldn’t require outside help, leveraging the experience, connections and work-product timing of outside counsel, accountants and other advisors can make the application process more efficient. Those experts often have templates and boilerplate language prepared to quickly tailor the application to a specific transaction and have the background to anticipate many regulator questions.

An experienced outside team also will likely have the connections with regulators to help quickly address discrepancies, questions or other matters that could prevent the application from being approved in a timely manner. If something comes up unexpectedly, leveraging ad advisor’s relationships can save the institution time and money.

Being proactive in regulator communications, pre-filing when appropriate, providing comprehensive information and leveraging the knowledge and connections of outside advisors can help make the M&A process go smoothly.


Joseph Silvia

Joseph E. Silvia is an attorney with Dickinson Wright in Chicago. He advises financial institution clients on a variety of corporate and regulatory matters including mergers & acquisitions, securitizations, strategic transactions, governance, international banking, payments, anti-money laundering and sanctions compliance, and private equity and venture capital investments.