Independent Banker - July 2021 - 55

present in the business they acquire.
" Banks know how to manage credit
and interest rate risk, but nonbanks
present other kinds of fi nancial risk, "
he says. " For example, how volatile is
the revenue stream? Is it cyclical or
seasonal? What are the main drivers
and catalysts of revenue? And is there a
fi xed base of expenses like with a wealth
management fi rm or are expenses
variable like with mortgage banking? "
The fi duciary responsibilities and
liabilities can also be signifi cant, Mosby
adds, especially when acquiring a wealth
management fi rm.
Culture clash?
Merging the potentially very diff erent
cultures of a community bank with
that of an acquired nonbank is another
challenge to a successful deal.
" Managing these cultures while
facilitating the cross-selling and crosspollination
you want to achieve with
a nonbank acquisition can be tricky, "
Mosby says.
" We're big on culture at our bank, "
Filgo says, " so we look for people with
a like-minded approach to ours in
businesses we seek to acquire. If you
don't have a good feeling about the
people or the culture, don't force it,
Need to get up
to speed on
M&A trends?
ICBA's
Community
Banker University
off ers a virtual
four-course
Mergers and
Acquisitions
(M&A) Bundle
that will give
you practical
advice about risk
management
strategies and
how COVID-19
has changed
the M&A
environment.
Visit icba.org/
education to
purchase a single
course or the
entire bundle.
because a culture fi t is really important. "
Even if the cultures mesh well,
community banks need to assess if
a deal makes sense from a business
perspective. " It's one thing to say you're
going to acquire a fi ntech business,
but making it work can be diffi cult if
you don't have any experience in this
area, " Tuck says. " This is the biggest
mistake I see: forcing an acquisition
when a bank really shouldn't be in the
business because it doesn't understand
it well enough. "
It comes down to risk management.
" How much risk are you willing to take
in acquiring a business you don't fully
understand? " Tuck says. " And once
you identify an acquisition target that
fi ts your risk profi le, how willing are
they going to be to sell to you? It takes
two willing participants to complete
an acquisition. "
According to Nelson, it's not a matter
of if but when you're going to encounter
obstacles during a nonbank acquisition.
" We changed directions many times
during our acquisition of Monotto, "
he says. " You need to be fl exible and
persistent and fi gure out a way to get
it done. "
Don Sadler is a writer in Georgia.
45 67
Make sure you understand
the business well enough
to manage it profitably.
Or, if your bank doesn't
have that expertise,
determine who you plan
to hire or retain.
Ensure that there will
be a good cultural
fit between the two
organizations. Community
banks are close-knit
with their customers
and communities, so the
culture of an organization
based outside of the
area or with a dissimilar
customer base may
be diff erent.
Anticipate and plan
for new regulatory
requirements or
guidelines. Financial
regulators are strict
about the kinds of
activities banks and
bank holding companies
can engage in. After a
deal, your community
bank may need to work
with new state and/or
federal regulators.
Stay focused on your
community bank's
customers-and the
acquired customers.
How will the acquisition
benefit both groups?
independentbanker.org Q 55
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Independent Banker - July 2021

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