Nimble Leadership Drives Strategic Readiness for Growth

For boards and executives, success hinges on more than just identifying the right opportunity. It requires transaction-readiness procedures, enforcement of financial discipline and strong leadership to guide teams effectively. With market dynamics in constant motion, hesitation can mean missed opportunities, while decisive leadership can unlock long-term value.

Early in the process, bank leaders should ask:

• Is the bank truly ready for M&A?
• What does post-deal success look like?
• Does the bank have the right advisors and internal capacity?
• How will this deal benefit their stakeholders and community?

Success depends on a strong foundation of operational excellence and forward-looking financial planning. Even a single misstep can quickly undermine investor confidence, trigger compliance issues and tarnish the institution’s reputation.

Directors who champion proactive planning and operational rigor can help their banks achieve clean and defensible deal announcements, pursue capital strategies that support sustainable growth and execute transactions that strengthen the balance sheet.

Do’s and Don’ts for Buyers and Sellers

For Sellers
Sellers often face challenges such as failing to retain key personnel, underestimating termination costs, skipping formal processes by failing to engage advisors or misjudging the level of due diligence required.

Don’t:

• Sign new long-term vendor contracts.
• Rely on handshakes or verbal agreements that lack formal documentation.

Do:

• Maintain strong vendor relationships and time renewals strategically.
• Use clear, timely pay-to-stay agreements to retain key individuals necessary to closing the deal.

For Buyers
Buyers may lack expertise, market awareness or a clear understanding of regulatory requirements.

Don’t:

• Pursue growth for the sake of growth.
• Underestimate the importance of culture fit.

Do:

• Engage advisors early to fill resource or knowledge gaps.
• Research the market well before identifying a target.
• Involve regulators early to support a smoother approval process.
• Document due diligence findings, antitrust considerations and community impact in regulatory applications.

For Both Parties

• Be prepared for an iterative process with many rounds of discussions, negotiations and document drafts before finalizing the deal.
• Involve accountants and valuation specialists early, as transaction accounting can significantly affect how the deal is perceived and executed.

Post-close, delivering on promises is essential. After a transaction, management should present to the board a comparison of actual results versus initial estimates. While mergers can blur financial outcomes and make it difficult to isolate performance, this exercise remains valuable for improving future deal execution.

Accounting Best Practices for Transaction Readiness
To strengthen transaction outcomes, boards should champion the adoption of the following accounting best practices, including:

• Audit-ready data. Support audit readiness from the outset of due diligence, confirming that systems contain the necessary data fields for risk and accounting teams. Flag missing data early to avoid downstream issues.
• Normalized risk ratings. Align and recalibrate risk ratings across institutions to support comparability and accuracy in credit analysis.
• Clear PCD loan criteria: Define consistent, defensible criteria for purchase credit deteriorated (PCD) loans. Update documentation throughout the diligence process.
• Integrated accounting workbooks. Use a single, well-structured purchase accounting workbook, connecting deal values, fair value adjustments and accruals in a clear and traceable format. This level of precision supports both internal review and external audit.
• Accrual preparedness. Review seller expense histories to anticipate accruals needed at close.
• Robust ACL modeling. Treat the allowance for credit losses (ACL) model with the same rigor as legacy models — fully documented, reconciled and updated to reflect the acquisition’s impact on legacy portfolios.
• SOX and FDICIA readiness. Engage auditors early to define the scope and reduce the risk of control gaps that might delay audits or lead to remediation under Sarbanes-Oxley (SOX) and Federal Deposit Insurance Corp. Improvement Act (FDICIA) requirements.

In M&A transactions, boards and executives who lead with discipline and strategic intent will close deals and create a lasting impact.

Ultimately, bank leadership is instrumental in guiding institutions through complicated financial decisions. By embedding strategic focus, disciplined financial practices and transaction-readiness into the organization’s culture, directors can steer their banks through periods of uncertainty, capitalize on emerging opportunities and build enduring value.