A client had an opportunity to purchase a trust department in a neighboring community from a bank struggling with capital and profitability (and regulatory problems). We were engaged to help the team through the process.
Our client was about 2 times the size of the acquisition target. As usual, the community bank trust department (our client) had limited resources available to deal with such an acquisition. We were engaged on a project basis to help!
Our Approach to the Situation
Our help included: Training the department Due Diligence team on what to look for and how to approach the due diligence. We provided comprehensive due diligence checklists that we customized to this situation. We participated in the due diligence process – onsite with the department team looking at files and other documentation. Then we consulted with bank and department management as the negotiations progressed. This was their first Trust acquisition opportunity and we were able to provide great insight into pricing, risk, profitability, staffing, retention and deal terms. Learn even more in our Valuation of Financial Assets section.
The result was that our client walked away from the opportunity. Bet that isn’t what you expected to read! The deal just wasn’t worth the risk. There were some unique accounts, way too many small accounts, three big account generating a great deal of revenue that had serious retention risk, and the seller was asking for terms that were unrealistic.