Hi guys,
I just wanted to ask you folks if you had any knowledge on key questions to ask a potential buyer (in this case, a private bank) on how he envisages a transaction in buying another private bank? I guess you would have to ask the approach, financial improvements/synergies, regulatory questions but in further detail? Thanks
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You would also want to get a sense of what their integration strategy is? Some regulatory bodies want to know what risk management controls are in place to ensure the larger (possibly more complex) entity can still operate in a safe and sound manner. How their consideration will impact capital ratios? How the asset portfolio mix will change and the subsequent credit metrics? etc. Does the target or even the acquirer have any outstanding enforcement actions/regulatory issues that may kill the deal? BSA/AML, compliance (usually non-financial issues) are things managers don't take too seriously but when it comes to the desk of a regulatory body they will/can kill or even delay the deal indefinitely.
These may be more specific/detailed than an early meeting warrants, but the bank should be thinking about these things to communicate the deal with the most important stakeholder in this case (the regulators); given that it is a private to private transaction.
Good luck.
Thanks for this.
Is there any technically orientated questions that can be presented? E.g. they have summed up the financial statements (BS and IS) and assumed some improvements/synergies but is there a good way to analyze these numbers and somehow come up with questions?
No one size fits all answer, but below should help get the ball rolling:
Look at their loan marks, compare them to other/recent deals see how they came up with them? Look at the reserves (ALLL) and see if it makes sense with the combined portfolio? Look at the potential cost cuts (layoffs, merged offices, real estate, etc.). What is their phase in period for the synerigies?
What do I have to look at when evaluating M&A potentials (Originally Posted: 02/28/2009)
Say, I work in the sell side, and I have to search for some potential companies that might be interested in buying the client's firm, what do I have to look at? My only prior knowledge or clue to this question is a lot of cash and not many debt to service. What else? Or can you introduce me any references or articals?
You should see it both qualitatively and quantitatively
Qualitative: 1. Can acquirer no longer grow organically? 2. Are there legislative changes in the works that make future M&A more difficult? 3. Does demand/supply look uncertain? If so, which companies create the most demand for my goods? If so, which companies provide me with supply for my goods? Taking control of demand and supply is instrumental in being a leader in that industry (i.e. beverage & automotive industry) 4. Where is the target company incorporated? Targets not incorporated in legal-friendly states like Delaware are very difficult to deal with if the deal goes awry. (key things to look at are - board member re-elections, annual shareholders meetings, etc.)
Quantitative: 1. Does the target look relatively cheap (compare current to historical multiples)? 2. What type of deals are happening in the market (All stock, cash or mix thereof)? Depending on what's happening, look at the acquirer's cap structure to see what/how much it can offer. 3. Look at target's capital structure. Does the target have any debt due in the coming months? If friendly deal won't consummate, take control of the debt due (i.e. Sirius) for hostile bid.
There are a lot more, but this is what I've learned thus far from my stint in M&A.
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