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The Misconceptions of Private Bank M&A

Last week, Kevin Strachan joined me in the podcast studio to discuss the ability of privately held banks to use their securities as consideration to acquire another institution.

Sadly, since the last time we recorded a podcast, the patriarch of our banking practice, Walt Moeling, passed away.  Our previously posted memorial included several links to remember Walt, but of particular relatedness to the podcast, we encourage everyone to listen again to two earlier podcasts with Walt sharing his wisdom.  In December 2016, Walt joined us on the podcast to discuss, among other things, the future of the banking industry and what one regulatory change he would make if given unlimited power. Then, in March 2017, Walt spoke about establishing a sustainable sales culture.

Somehow, I was able to read the notes I had scribbled about Walt, and we then continued to discuss two common (and contradictory) misconceptions on private company merger and acquisition activity. 

The first misconception is that privately held companies can’t issue stock as merger consideration.  The second misconception is that privately held companies can issue stock without restriction as merger consideration.  We regularly hear both of these misconceptions when advising private companies on a potential merger transaction where they are looking to issue (or receive) private company stock.  While neither of these ideas are correct, the truth is messy and usually requires further discussion.

Among the topics covered with Kevin in this episode of The Bank Account are:

  • the additional flexibility of banks without holding companies (and the limitations of that flexibility);
  • SEC registration via merger;
  • Regulation A+ in mergers;
  • the state Fairness Hearing exemption; and
  • using Rule 506 of Regulation D to issue securities to the target shareholders.

For private companies considering an acquisition of another institution, further conversations with investment bankers and lawyers are almost certainly going to be needed, but this episode of The Bank Account can give you a head start in understanding some of the potential options that may be out there.

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FAST Act Rule Changes for Banks

FAST Act Rule Changes for Banks

April 30, 2019

Authored by: Kevin Strachan

The SEC recently published final rules that allow publicly traded bank holding companies and banks to simplify their public disclosures and provide more meaningful information to investors. Most of the rules become effective on May 2, 2019, which allow many registrants to benefit from them on their Form 10-Q filings for the quarter ended March 31, 2019.

This post is intended to highlight those changes that we expect to be most significant to registrants in the banking industry. BCLP has also produced a more thorough summary of the final rules as applicable to all registrants. The complete, 252-page adopting release is available here.

MD&A

Most registrants provide three years of MD&A narrative.  The new rule allows such registrants to omit discussion of the earliest of the three years if such discussion was previously filed, so that the 10-K MD&A will address only the year being reported and the previous year.  Smaller reporting companies are only required to provide two years of financials and MD&A (and emerging growth companies are allowed to omit periods prior to their IPO), so these registrants will not see any benefit from this change.

The revisions to the MD&A requirements also eliminate the requirement that issuers provide a year-to-year comparison.  In the related commentary in the adopting release, the SEC characterizes this change as providing registrants flexibility to tailor their presentation.  Hopefully, over time, the SEC’s expressed purpose will encourage creative approaches to this area. 

Exhibits – Material Contracts

Previously, a two year “lookback” applied, such that material contracts entered into in the two years prior to the filing were required to be disclosed on the exhibit index even if the contracts had been fully performed.  A common example is merger agreements—companies are currently required to continue to file merger agreements as exhibits even after closing.  The new rule eliminates this requirement (other than for newly public companies), such that material contracts that have been fully performed are no longer required to be disclosed.

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Public Banks and Proxy Advisors

the-bank-accountOn the latest episode of The Bank Account, Jonathan and I were joined by our colleague, Kevin Strachan, to discuss the role and importance of the various proxy advisory services.  Corporate governance continues to be a hot topic in the industry, and the proxy advisory services have a significant sway in determining what provisions are deemed “acceptable” by many institutional investors.

Within the podcast, we look at the two primary proxy advisory services, Institutional Shareholder Services (ISS, not to be confused with ISIS, although we have them pronounced identically by some frustrated boards) and Glass Lewis.  We look at the differences between the two services, where they’ve historically focused, and ways in which they sometimes have diminished power and sometimes enhanced power.

As with so many issues, obtaining the right corporate governance for any individual bank or holding company is not something that should simply be taken off a shelf (or off a podcast).  Instead, we encourage interested parties to engage experienced counsel, such as Bryan Cave LLP, to identify the best individualized approach for the specific situation.

You can also always follow us on Twitter.  Jonathan is @HightowerBanks, Kevin is @KevinStrachan, and I’m @RobertKlingler.

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Selling Your Mission to Shareholders

Selling Your Mission to Shareholders

February 27, 2017

Authored by: Robert Klingler

the-bank-accountOn Friday, February 24, 2017, Jonathan sat down with our colleague, Kevin Strachan, to discuss ideas for banks to highlight community involvement in their shareholder meetings.  As mentioned during the podcast, I had the pleasure of judging the next generation of transactional lawyers at a LawMeets competition hosted by Emory Law School, but I enjoyed consuming this podcast as a listener.

Before diving into shareholder engagement, Jonathan and Kevin also comment briefly on the leaked Hensarling memo on version 2.0 of the Choice Act, and some of the “interesting” banking ideas expressed by Bruce Cahan, adjunct professor at Stanford University, on a recent American Banker podcast episode.

On this episode of The Bank Account, Jonathan and Kevin touch on some excellent examples of shareholder engagement, including:

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