When you put your house on the market, you fix some things and you may stage it. Some cleanup can be warranted with a bank, but should you work on efficiency ratio before putting up the “for sale” sign?
Consultant Peyton Patterson says the belief that a bank should have a great efficiency ratio to be a good target can actually hurt a deal. Why? “A buyer wants to take advantage of your inefficiencies,” she says. Having some fat that can be squeezed out actually appeals.
Not all experts agree. Alston & Bird LLP partner Mark Kanaly says that “some buyers would rather buy a bank that is lean.”
Some tips for sale preparation:
• Look at a mirror. Go into any deal realizing that there’s a good chance a prospective acquirer has been mystery shopping the bank.
• Look at your staff. Do your front-line people get the idea of sales and customer service? That’s appealing.
• Look at your portfolio. Banks sell for higher prices than thrifts. The more your portfolio makes you look like a savings institution, the lower your price may be.
• Look at your branches. A buyer will likely remodel, but does your branch network include features that make it look like a headache?
• Look at your contracts. Players with lucrative change of control agreements want what’s due them. Is that what’s intended? It’s more a buyer’s concern, but it may come up.