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M&A: Looking to sell? Some expert tips

Common wisdom isn’t always right

Putting your bank on the market? Take a close look at it from a potential buyer's perspective first. Putting your bank on the market? Take a close look at it from a potential buyer's perspective first.

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.

Read main article, "M&A: Waiting at the crossroads"

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This article originally appeared in the April-May Banking Exchange magazine. Read the article in magazine format.

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Steve Cocheo

Steve Cocheo’s 38 years in financial journalism have taken him to all 50 states and nearly every corner of financial services in companies from fintech startups to community banks to regional and national giants. He is executive editor of Banking Exchange and digital content manager of www.bankingexchange.com. Previously he spent 36 years on the staff of ABA Banking Journal and 22 years concurrently as editor of ABA Bank Directors Briefing. He is the only journalist to have sat in on three federal banking exams, was a finalist for the Jesse H. Neal national business journalism awards, and a winner of multiple awards from the American Society of Business Publication Editors. A year ago he finally gave up his cherished Blackberry for an iPhone, recently tried Uber, and has made it by Citibike from Battery Park to the Washington Bridge… and back.

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