Viewpoint on opportunities in crisis

December 2009
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Viewpoint on opportunities in crisis

At a glance

PwC's report provides our firm's point of view on the challenges in failed bank acquisitions and a framework that addresses the complex operational and accounting challenges associated with a failed bank acquisition.

The financial crisis has provided a strategic opportunity for healthy financial institutions to grow and expand in the US market through failed bank acquisitions. These opportunities, in our view, should to be approached in a manner that differs from normal M&A and/or organic growth strategies.

These deals present unique integration challenges that banks may not have encountered in previous acquisitions. Specifically, FDIC-assisted deals differ from other acquisitions in several notable ways:

  • Deal timelines are condensed and typically do not close at the month's end
  • Loss-sharing agreements require changes to existing operations.
  • Acquisition and loss-sharing accounting generate a need to manage multiple accounting bases.

These challenges can place considerable strain on the ability of the acquiring bank to successfully integrate the acquired bank. In particular, the acquiring bank will likely face issues in:

  • Performing valuations, cash flow modeling, and loan performance analysis
  • Building new processes to support SOP 03-3, FAS 141R, and tax reporting
  • Accessing accurate and timely data
  • Generating external reporting
  • Locating and accessing specialized skills and tools necessary to drive the initial integration steps