How to Manage Successful M&A Deals and Heavy Regulations

Matt Gambs is very familiar with the community banking realm — he’s been in it for more than 23 years and has worked every angle of the business, starting as a teller and working his way up to President and CEO of two different community banks in the Chicago metro area: BB&T Bancorp and Diamond Bank. He led both banks through successful acquisitions before landing at his current role with Wintrust Financial.

Matt brings an in-depth knowledge of deals as a banker on the seller’s side of the table. He recounted his first big deal that involved an all-too-common problem.

BB&T was a community bank that grew to $450M by garnering approval and investments from local families to become shareholders. By 2004, shareholders were aging, retiring, and seeking liquidity. As President and CEO, Matt hired an advisor to locate a buyer offering a cash deal — not because they needed to sell, but because it was in the best interest of the shareholders.

“[Our shareholders] weren’t asked to take stock, it was a complete cash deal and that was really important to them — to get everybody out clean.”

BB&T chose an advisor who had proven their ability to sell banks. I gave the board three options for advisors. Fortunately, Matt and the board agreed on their top pick. “They weren’t the biggest shot. They weren’t the flashiest presentation.” They were successful at making deals that benefited shareholders. “They were just good at it.”

“The challenge is to not bite at the first deal.” It took approximately two years to find the right buyer at the right time. They had four legitimate buyers immediately and narrowed it down based on valuation and fit.

“You get your board to approve it, you’re excited, you announce it, and you don’t realize how much time and waiting goes into the next phase of that. That was an eye-opening experience for me.”

Even though Matt comes from the heavily regulated industry of banking, he was still surprised by the complexity of the deal and time it required to get regulatory approval. “Your deal may be fifth in the pile on someone’s desk and there isn’t always something you can do about it.”

Matt also found that closing the deal did not mean the most difficult aspect was over. After all, price is based on performance figures, so minimum performance thresholds had to be maintained during integration.

“When the newness and excitement of the deal wears off, there’s a lot of change that goes into that. And you have employee issues, shareholder issues, and board issues.”

When it comes to owning a regulated institution, Matt believes it is very challenging to consider starting a community or boutique bank in a metroplex any longer.

“To get people anywhere near the return that they want for their investment, this is a challenging space to do it in.”

The margins in banking are very thin when compared to other industries. “There is very little room for error.”

When going through banking exits, it is essential to align your interests. “Is this the best deal for them, or is this the best deal for us?” You have to make sure your shareholders are taken care of.

At the end of the day, the regulatory approval and diligence process are time-consuming. When giving advice to other sellers, Matt emphasizes one thing: patience.

“You have to be patient. . . . I had to really slow myself down.”

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Originally published at dealroom.net.