In the world of mergers and acquisitions, time is indeedmoney, and longer delays mean losing both.
When the Federal Reserve Board the merger of with in September2015, it ended a three-year process that included four merger .
BancorpSouthInc. is currently awaiting approval of its pending bankacquisitions of OuachitaBancshares Corp. and Central Community Corp., both announced in .
In opening remarks at the 8th annual Bank M&A Symposiumhosted by S&P Global Market Intelligence, veteran deal attorney andSullivan & Cromwell LLP Senior Chairman H. Rodgin Cohen that delays in the applicationprocess can also slow the realization of cost savings to an acquiringinstitution.
Most banks won't experience delays as large as thoseexperienced by M&T or BancorpSouth. The average processing time for mergerand acquisition proposals was 47 days in 2015, according to the FederalReserve's most recent semiannual report on banking applications. But forproposals where the Fed received an adverse public comment, the average processingtime in 2015 was 297 days — a delay of over eight months. Among other things,applications involve intense scrutiny into Community Reinvestment Act ratings,Home Mortgage Disclosure Act data, and compliance with the Bank Secrecy Act andAnti-Money Laundering statutes.
At the event, Federal Reserve deputy director Maryann Hunterdefended the application process, saying that there are actions banks can taketo shorten application process times. Preparation, Hunter said, is key infiling applications for a merger or acquisition.
She promoted the use of the Federal Reserve's pre-filingprocess, which allows companies in the market as a buyer or seller to submit anunofficial application and get feedback from regulators. The pre-filing processwas initiated as partof an effort in 2014 to bring more transparency to the process.
Hunter also mentioned that regulators are keeping up withcurrent banking trends when looking at financial statements. She noted thatCRE exposures are aspace where regulators have been paying more attention, with the post-crisisrecovery spurring on more banks to take higher risk positions.
But Hunter reiterated that there are also grayer, less-quantifiableaspects of an application that regulators look into. For example, regulatorswill check for the strength and skills of management teams within the contextof the business plan submitted. She also advised banks be aware of what theircommunity might say when a business transaction is announced.
"Number one isknowing what community groups in your area might say about you and whether ornot they feel that it harms your reputation or that you're not accessible or intouch with the needs of particularly underserved parts of the community,"Hunter said.
Hunter did not say if any reform is on the table for theapplication process, although she did note in questioning that she hopes to seethe process address the repeated comments of "serial protesters" — asthe questioner phrased it — in a quicker fashion.
"We're trying to find ways we can streamline theanalysis required to shorten the process," she said.