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Ardmore Banking Advisors sponsored and hosted a breakout session at the Bank Director’s 2024 Bank Audit & Risk Conference held in Chicago, June 11-12, entitled: M&A: “It Ain’t Over Until it’s Over” – Threats and Opportunities, emphasizing loan portfolio due diligence.

The breakout session utilized a panel format featuring:

• Todd Sardich, SVP of Risk Management & Senior Director of Consulting, Ardmore Banking Advisors, Inc.
• Duane Brobst, Senior Consultant, Ardmore Banking Advisors, Inc. (former CRO/CCO of Univest)
• John Reber, EVP & Director of Risk Management, Citizens & Northern Bank
• Moderated by: Steven Peck, COO & Senior Director of Development, Ardmore Banking Advisors, Inc.

The focus of the breakout discussion was the often-overlooked critical steps that should take place after the M&A deal is announced but before it closes. Establishing an accurate loan portfolio credit mark and transaction price is fundamental but this does not complete the due diligence process. Using “war stories” from their personal experience to highlight the threats to avoid and opportunities to benefit from, the panel highlighted the following:

• Plan thoroughly by starting with a Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis of the proposed acquisition.
• Be thorough and comprehensive without getting lost in the weeds. While transactional review is important, it is imperative to get an understanding of the target’s credit culture and credit administration practices.
• As a buyer, always be skeptical because “you don’t know what you don’t know“, but being overly conservative and negative can cause a potential deal to fall apart.
• Always know that shortly you may be “married” to the target.
• Use your best internal and external resources for the analysis.
• Do not rush to finish at the risk of missing critical issues. The due diligence process does not end once the deal is announced as new loans may become a problem, identified problem loans may improve and new loans will be booked. Performing a follow up, augmented due diligence prior to closing is prudent.
• Always use the exercise as a learning tool for the future merger opportunities.
• Remember, the real work – integrating the parties – has not yet begun.

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