A diversified financial services and mortgage servicing organization was not only facing an increasingly complicated regulatory environment but had also developed numerous lines of business that management wanted to evaluate for possible inclusion in a commercial banking structure.
The client’s executive management presented Artisan Advisors with this proposition: “Help us decide if we should we become a bank. And, if we do want to be a bank, what would that look like?”
The Exploration
As always, Artisan Advisors started with exploring answers to key questions:
- What would be the best commercial banking charter for the client?
- Which of the client’s business activities would work best in a commercial banking structure?
- What would be the regulatory, financial, and shareholder characteristics that a bank would have to have to be considered as a potential acquisition candidate?
- What would be the areas of strategic and operational synergies when the client’s businesses were combined with a commercial bank?
- What would the pro forma income statements and balance sheets look like for any particular candidate, and what would be the reasonable assumptions upon which to build a set of financial projections?
- What would be the capital required to execute a bank acquisition and what would be a reasonable IRR to expect?
The Approach
Artisan Advisors performed a top-to-bottom review of the client, assessing its various businesses and the profitability of those businesses, as well as evaluating those businesses for “permissible activity” status. After its business-line assessment, Artisan produced a detailed analysis that addressed why the client should pursue a commercial banking strategy, the regulatory advantages of operating as a bank, and the potential marketing, financial, and operational synergies of a banking strategy. As part of its analysis, Artisan Advisors also developed an acquisition model that would allow for the client to assess different acquisition scenarios.
The Results
Upon review of Artisan Advisors’ analysis, client executive management and the client’s board of directors approved the pursuit of a banking strategy for the company. Artisan Advisors assisted the client in identifying target banks and handled all financial modeling for the client target pool.
We assisted the client’s legal and other professional advisors in crafting a purchase offer for a bank in the target pool. Consequently, the client successfully made a sizeable investment in a $400mm commercial bank, with the goal of becoming a multi-billion-dollar organization within 5 years.
Artisan Advisors has been engaged by the client to assist in the integration of certain client business lines into the bank. That integration will include addressing a number of challenges, including migrating the client’s state-of-the-art technology to the acquired bank to maximize cross-selling opportunities, and bringing policies and procedures up to the standards of a larger, more complex organization.
Client testimonial
“We chose Artisan Advisors not only for their banking experience and knowledge, but for their unmatched ability to help us, post-acquisition, with strategy and execution.”