This reimbursement is what puts an offer from a credit union on equal footing with one from a bank. Therefore, it is an accepted and standard feature of nearly every credit union offer for a C Corporation bank target. In determining what a credit union buyer can pay for the bank, this special outlay must be considered part of the overall expenditure on the transaction, which otherwise includes the purchase price and other deal costs.

Other Questions for Potential Buyers to Consider

Is offering a fixed dollar price or a multiple of book value based on equity at closing preferable?
How can the credit union properly incentivize the seller's management between now and closing?
What is typical for change of control payments, along with non-solicitation and non-competition agreements?
What deal costs of the seller will the credit union be expected to cover?
What options does the credit union have if there are assets or liabilities it does not, or cannot, take on?
When going through the transaction process, what resources are available in-house and what needs to be outsourced?
What does the M&A advisor provide – just pricing guidance and negotiation, or are broader capabilities like purchase price adjustments, new member communication and onboarding, integration advisory, loan sales, etc. available?

With the opportunity to acquire banks, credit unions have more arrows in the quiver to provide financial stability, generate more value for stakeholders and expand their visions. Buyers that have properly prepared and maintain an open mind will be the ones that reap the long-term rewards.

Doug Hillhouse is Managing Director, M&A Advisory for ALM First in Dallas, Texas.

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What to Consider Before Pursuing a Bank Acquisition

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