Has anyone heard of a search fund targeting commercial banks?

searcher profile

March 05, 2020

by a searcher from The University of Texas at Austin - Red McCombs School of Business in 700 Milam St, Houston, TX 77002, USA

0
8
98
Replies
8
commentor profile
Reply by an member
from Universidad Nacional de Educación a Distancia in 11100 San Fernando, Cádiz, España
That's a very interesting topic, I've thought a lot about it, but I have not heard any comment in the search fund community in regards to it. Acquiring a commercial bank definitely has some pros and cons.

Banks are leveraged businesses by nature, so you may not be able to finance the deal with debt. Also, managing a bank is not an easy think to do, you have to be very familiar with the industry dynamics and the regulatory environment. If you don't have experience in the industry it's probably not a good idea.

On the other hand, like Jason said, a commercial bank can serve as a platform to go into other segments/businesses within the finance industry.
I don't know about the banking industry in the U.S, but in Europe the small banks are getting bought by bigger banks, so it may not be hard to find a seller whenever you are ready to sell.
commentor profile
Reply by a searcher
from University of Pennsylvania in Indianapolis, IN, USA
I have actually originated a few opportunities in the commercial banking space and the PE groups I worked with walked away because of how the banks value themselves compared to typical PE valuation methodology and, as mentioned in the previous response, the regulatory environment and requirements re: cash reserves. It is a similar issue with insurance carriers.

While many groups love financial services, the challenges related to commercial banking make it a difficult area for traditional PE. With that said, a long-term perspective from a family office might make an ideal partner in the space. Also, a commercial bank platform that then acquires a payments, money transfer or specialty lending add-on might be an interesting play because the deposits can be put to work in other ways to earn better returns than a standard depository bank.
commentor profile
+6 more replies.
Join the discussion