If you long for the freedom to incorporate fresh ideas into the management of a banking institution, it's time to consider buying a bank. Acquisition multiples have come down and the industry desperately needs new capital. Plus, in the current regulatory environment, it is far easier to purchase an existing institution than to launch a de novo bank.
The process of buying a bank is similar to that of starting a de novo. Both projects require three primary inputs:
- A bank board of directors
- A bank management team
- Business plan
Purchasing a bank, however, offers certain advantages over starting a new bank. Given the headwinds of a troubled economy, these advantages are more significant now than ever:
- Regulator mindset. In this economy, regulators do not want to add more banks to the system; they are looking at each new bank application as a potential failure. A bank purchase transaction, however, potentially represents one less problem in the industry. With a creative management team, you can revive a once-sinking bank by infusing it with new capital and new ideas. If the project is successful, the formerly weak bank can become a frontrunner in the community.
- History. The launch of a new bank won't be successful unless you develop a product and service set that lures customers away from other banks. Changing customers' buying habits is an expensive proposition. When you purchase an existing bank, however, you are also purchasing established customer relationships. The bank already has a foothold in the community, so you are beginning with a base that can be grown slowly over time.
- Shortened planning process. When you start a de novo, the planning process begins from scratch. You must select a bank location and name, you must define the product and service set, you must oversee construction or tenant improvements, etc. When you purchase a bank, most of those decisions have already been made. Your job begins with evaluating the existing operations and identifying where changes should be made.
Are you ready to explore the possibility of purchasing a bank? Let us help you identify opportunities and make the right decisions. De Novo Strategy specializes in building smarter banks.