Title: What Should You Expect from a Merger Advisor? Not Every Bank Uses an Investment Bank or Legal Advisor, but Most Do. Here Are Some of the Reasons Why, and How to Get the Most out of the Relationship
Abstract: Every bank deal carries a story of how the alliance makes sense from a strategic, geographic, technological, or line-of-business perspective. But behind the scenes, there are often other stories about the MA how the advisors were chosen; and how well they performed. There was the case, for example, of the bank that felt it knew potential acquirers so well via social relationships that the bank didn't need an investment banker for a potential sale. Much to its dismay, when an offer was made, it was substantially short of what the seller thought it was worth--and the process ended in a stalemate. Subsequently, the bank sought the services of an investment bank and garnered a price with an unexpected acquirer at a price beyond its original goal. That story, not surprisingly, was related anonymously. The world of investment banking and mergers and acquisitions generally, despite all the attention paid to the numbers, is a highly personalized business. Thus, pretty much everyone contacted for this story was skittish about talking for attribution about real life experiences, instructive as they can be. never know when you might be doing business with someone again. But there was plenty of willingness to talk about the need for MA and what banks should look for in an advisor/investment banker, especially for small to mid-sized institutions that have become more focused in recent years on merger/acquisition strategies. Many of them have tapped the talents of advisors whose services range in scope from legal to accounting to investment banking expertise. Interviews with bankers and advisors reveal that need for such services varies from circumstance to circumstance. Some say that they do not utilize outside investment banking advice given available internal resources/talent, while others have ongoing relationships or utilize outside work only on selected projects. Credentials, cost, control, and compatibility all weigh into the picture. Moreover, perspectives on the need for advice can vary whether a bank is an acquirer or seller. One of the key qualities to consider in selecting an advisor is finding someone you can trust--someone who has earned your confidence, is a good listener to what you want to accomplish, and can execute according to the stated game plan, says Curtis D. Carpenter, Sheshunoff & Co. Investment Banking managing director, Austin, Tex. You want someone who knows the players and isn't afraid to call a situation the way he or she sees it, says Arnold Danielson, chairman of Danielson Capital (formerly Danielson Associates), Vienna, Va. Buyers or sellers may find M&A advisors useful for a variety of reasons. First, sources say, experienced advisors can provide efficiency via their network of contacts, their knowledge of market dynamics, and their familiarity with financial modeling techniques. Second, an advisor can serve as an effective intermediary in negotiating details. Third, an advisor's familiarity with the process can help banks avoid potential pitfalls, while keeping the project on track from legal and regulatory standpoints. Needed: perspective and context Given the demands of merger negotiation and execution, experts state that banks should also consider the full range of services that a potential advisor provides. As a starting point, a company should go through the full analysis of strategic options available to them to produce shareholder value, says Steven D. Hovde, president and chief executive officer of Hovde Financial Inc., who works out of the firm's Chicago office. In some instances, it may involve remaining independent, but making various changes. It may involve raising capital or stock repurchases or divestiture of lines of business or the sale of branches in slower-growth markets. Alternatively, it may entail the acquisition of branches or banks or de novo activity. …
Publication Year: 2006
Publication Date: 2006-12-01
Language: en
Type: article
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