Bank Mergers - Curious to get some opinions
Hi guys,
I am a frequent reader but infrequent poster on here. Anyways, I was curious to get some opinions. I was thinking... you hear about some of the more conservative firms (i.e. less leveraged model) who are in relatively good shape right now such as <span class='keyword_link'><a href="/company/robert-w-baird-co" target="_blank">Robert W Baird</a></span> out of Chicago. Do you think that their <span class='keyword_link'><a href="/resources/templates/excel-financial-modeling/balance-sheet-template">relatively strong balance sheet</a></span> would make them an attractive buyout for a bigger firm in this market? The idea just crossed my mind and I'd be curious to get some opinions. Your thoughts...
Baird's out of Milwaukee (though, they have a Chicago office). They actually had minimal hiring last year, and had no ability to pick up really qualified first years that got their offers rescinded from other firms.
I would have expected more consolidation across the industry but I think a lot of the banks that have available capital for acquisitions are really just holding their breathe trying to ride out the downturn...there is no doubt that groups who are willing to be more aggressive and have the capital can make a killing in this environment. I think there is a lot more opportunity in the distressed space rather than what you mentioned.
H.e. pennypacker... You are right. I forgot they are out of Milwaukee. I just forget that because most of the PE team (which I have the most connection to) is out of Chi. Junkbondswap... I could see that. Are you suggesting that it would actually be some of the banks who have more toxic assets that would be swept up for cheap by the bigger banks (potentially)?
Yes, banks generally trade as a multiple of book value and in this environment there are a ton of banks that could be acquired for far less than BV due to liquidity issues and grind down. Obviously, one needs to do some pretty in depth loan portfolio due diligence to analyze not only things like non-performing loans (NPLs) but resi/comm RE exposure, geographic diversity, etc. Knowing what you are buying and having a macro thesis are obviously the key drivers here. Beyond the distressed environment I do think there will be continued consolidation amidst the turmoil as banks seek to expand their deposit base/ # of branches.
Another interesting concept would be to create a denovo bank, get a state or federal bank charter and begin to buy portfolios of loans from distressed players, competitors and the government.
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