Incorporating M&A into the Strategic Planning Process

Transcription

1 Incorporating M&A into the Strategic Planning Process January 27, :30 8:15 a.m. Craig Mancinotti Managing Director & Principal Rick Maroney Managing Director & Principal

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3 The Strategic Planning Process Directors Direct and Managers Manage I. Overview: Right-Size your Planning Process Planning process for $100M, $500M and $1B banks Annual review and preparation is industry Best Practice Role of Directors/Role of Management To use or not to use a Facilitator II. Start with a Board Planning Retreat Use a pre-meeting planning questionnaire Sample Questionnaire (Exhibit A) Level of Preparation = Level of Effectiveness Should senior management attend? Purpose: Identify critical strategic issues and achieve Board consensus on those issues Sample Agenda (Exhibit B) Post-meeting written summary III. Preparing the Strategic Plan Document Management s responsibility Team approach (CEO and senior management group) Sample Table of Contents (Exhibit C) Perspectives on Vision and Mission Statements Key Strategic Priorities should be framed based on Board consensus Financial projections/targets are not a substitute for rigorous annual budgeting process Solicit input from all employees to develop Functional Area Tactical Action Plans Monitor quarterly and update annually 1

4 Incorporating M&A into the Strategic Plan Getting Started Evaluate scalability of your current strategic plan Critically assess stress points in organizational chart Identify any regulatory issues that could impede a deal Discuss position on certain social issues (board seats, C-Level management positions) Assess financial capacity (cash, stock, target size) Determine geographic reach how far are we willing to go and effectively manage the acquisition Consider an M&A policy M&A Policy Sample Table of Contents Granting of authority Who? CEO, M&A Committee What? Make contact; submit LOI Target parameters size, geography, other Financial results EPS impact, TBV dilution and payback period, IRR Due diligence team Internal team operations, credit, risk, department heads Loan review Financial advisors Legal advisors Proactive Steps Identify targets within defined geographic area and size limitations (whole banks, branches) Prioritize targets with board or M&A committee; quarterly review of performance/events Model one or two targets with public information Identify probable social issues with priority targets Discuss contact plan for each priority target (CEO, board member) Contact professionals to describe M&A interest (investment bankers, lawyers, accountants) Line up professional team with contingency plans for conflicts Preliminary M&A Analysis See Exhibit D for sample Table of Contents and Target and Market Evaluation Prioritize and evaluate markets based on economic, demographic and competitive factors Consider identifying: Branch targets Strategic merger candidates Priority acquisition targets (optimal size and markets) Secondary acquisition targets (smaller, less attractive markets) 2

5 EXHIBIT A First Bank Anytown, USA PLANNING QUESTIONNAIRE In Preparation for Strategic Planning Process S.W.O.T Analysis 1. List the three greatest Strengths of the Bank A. B. C. 2. List the three greatest Weaknesses of the Bank A. B. C. 3. List the three greatest Opportunities for the Bank A. B. C. 4. List the three greatest Threats facing the Bank A. B. C. 3

6 EXHIBIT A (continued) First Bank Anytown, USA PLANNING QUESTIONNAIRE In Preparation for Strategic Planning Process Identification of Critical Strategic Issues List the most important Strategic Issues facing the Bank. The term Strategic Issue means any fundamental issue the organization has to address to achieve its mission and move towards its desired future Please return your completed questionnaire electronically to: Craig J. Mancinotti Managing Director and Principal Austin Associates, LLC craig.mancinotti@austinassociates.com 4

7 EXHIBIT B Sample Agenda First Bank, Anytown, USA I. Preparing Foundation for Strategic Planning Discussion A. Economic Conditions and State of the Industry B. Financial Performance Review of Bank and Parent Company C. Peer Group Comparisons D. Market Share Data E. Market Update - Bank Stock Trading Multiples F. Market Update - M&A Environment II. III. Questionnaire Results A. S.W.O.T. B. Key Strategic Issues Key Planning Issues A. Strategic Direction Aging shareholder base Sell, Merge or Remain Independent Growth Strategy vs. Profitability Focus Future Vision B. Succession Planning CEO Senior Management Board C. Management Development Organization Chart What are the bank s priorities? D. Organic Growth Limited growth markets Strategies to achieve growth De novo branching E. Geographic Expansion Define the geographic market area for expansion Strategic Mergers? Acquisitions? Specific Target opportunity review financial modeling 5

8 EXHIBIT B (continued) F. Financial Performance Balance sheet growth expectations Most important metrics for financial performance evaluation? What level of performance is acceptable to the Board? Capital Policy/Dividend Policy G. Products and Services Comparison of products/services versus the competition What are the bank s deficiencies? What are the bank s priorities? Impact of technology Fee-based business lines: Trust, Investments, Insurance, Mortgage Banking H. Marketing/Culture Self-assessment Do we have a strong sales culture? What is the bank s Marketing Plan? I. Open Discussion 6

9 EXHIBIT C First Bank Anytown, USA STRATEGIC PLAN Table of Contents A. Introduction Background and History... 1 B. Vision... 2 C. Mission Statement... 2 D. Internal Situation Analysis... 3 E. S.W.O.T F. Key Strategic Priorities Remain Focused on Existing Target Markets 2. Recruit, Attract and Retain Qualified, Experienced Staff 3. Best Practices Enterprise Risk Management ( ERM ) Program 4. Offer Competitive Products and Services 5. Expand Marketing Program 6. Continue to Improve Mortgage Banking Performance 7. Organic Growth Goals: Increase Assets by $50 million per year from De Novo Branching Strategy 9. Prudently Pursue Advances in Technology 10. Maintenance of Credit Quality 11. Capital: Targeted Tier 1 Leverage Ratio of 9.00 Percent 12. Mergers and Acquisitions 13. Financial Performance Goal of 1.00 Percent Return on Average Assets G. Financial Forecast Exhibit 1: Strategic Plan Financial Forecast... Tab 1 Exhibit 2: Functional Area Tactical Action Plans... Tab 2 7

10 EXHIBIT C (continued) Functional Area Tactical Action Plans Attached as Exhibit 2 to this Strategic Plan is a matrix of key functional area tactical action plans, including the following: A. Accounting/Financial Management/Budgeting B. Lending C. Retail/Deposit Gathering D. Marketing E. Operations F. Technology G. Human Resources/Staffing H. Products and Services I. Facilities/Geographic Locations J. Credit Administration K. Compliance L. Miscellaneous Management has developed specific goals, action plans and deadlines for each identified priority, and has assigned individual responsibility to ensure accountability. Management will provide Strategic Plan progress reports to the Board in February, May, August and November regarding the status of planning priorities and action plans. Management may review and update the plan at more frequent intervals at its discretion. 8

11 EXHIBIT D First Bank Anytown, USA Geographic Expansion Strategy Table of Contents Section Tables Expansion Area and Market Data Branch Divestiture Targets Merger Candidates ($250 - $500 mil) Primary Acquisition Targets ($50 - $250 mil) Secondary Acquisition Targets (< $50 mil) 5 5 M&A Transaction Data Capital Capacity Analysis Sample Analysis of Acquiring ABC Bank

12 EXHIBIT D (Continued) FIRST BANK Target Evaluation Main Main County Main City County Total County County/ Seat Top Tier Assets Market Market Share Market Share LTM NPAs/ Bank Name City State (Y/N) Holding Company (000) Rank (1) % Rank (2) % Rank (2) ROAA Assets 1 N $221, % 2 / % 1 / % 0.48% 2 Y $213, % 1 / % 1 / % 5.52% 3 N $175, % 9 / % 2 / % 7.41% 4 Y $169, % 2 / % 1 / % 1.62% 5 Y $143, % 7 / % 6 / % 0.74% 6 N $131, % 2 / % 2 / % 1.84% 7 N $127, % 8 / % 6 / % 1.74% 8 Y $118, % 10 / % 4 / % 3.99% 9 Y $114, % 2 / % 2 / % 0.69% 10 N $111, % 9 / % 4 / % 1.36% 11 N $100, % 2 / % 1 / % 1.25% 12 N $92, % 3 / % 1 / % 3.04% 13 N $85, % 5 / % 1 / % 0.20% 14 Y $82, % 3 / % 1 / % 3.75% 15 Y $81, % 9 / % 7 / % 0.09% 16 Y $63, % 1 / % 1 / % 0.23% 17 N $56, % 5 / % 1 / % 0.39% 18 N $56, % 5 / % 1 / % 0.13% 19 Y $51, % 4 / % 4 / % 0.80% 20 N $32, % 9 / % 4 / % 0.92% 21 N $31, % 9 / % 1 / % 4.26% 22 N $67, % 3 / % 1 / % 1.15% Note: Financial data for targets as of. (1) Out of selected counties. Based on composite market and banking analysis ranking. (2) Main county and city market share rankings exclude institutions reporting zero deposits. 10

13 EXHIBIT D (Continued) FIRST BANK Branch Cluster Target Evaluation Branch Cluster(s) Information Total Total Assets # of Deposits Company Name City ST ($000) Branches ($000) Cities of Selected Branches (Note) 1 $2,439,494,000 4 $198,693 City A* (2), City B* (1), City C (1) 2 $353,415,000 6 $171,038 City D (2), City E (1), City F (1), City G (1), City H (1) 3 $325,156,480 4 $155,250 City I* (2), City J* (1), City K (1) 4 $304,547,667 5 $236,462 City L* (1), City M* (1), City N* (2), City O* (1) 5 $123,360,351 No Branch Cluster(s) Identified 6 $103,028,520 3 $73,973 City P* (2), City Q (1) 7 $90,858,779 No Branch Cluster(s) Identified 8 $56,113,687 6 $225,632 City R* (2), City S* (3), City T* (1) 9 $23,534,261 No Branch Cluster(s) Identified 10 $6,640,473 No Branch Cluster(s) Identified 11 $6,274,575 2 $48,219 City U* (1), City V* (1) 12 $6,087,390 3 $77,381 City W* (2), City X* (1) 13 $2,771,055 4 $119,362 City W* (4) 14 $1,143,248 No Branch Cluster(s) Identified 15 $757,716 No Branch Cluster(s) Identified 16 $505,860 1 $26,970 City X* (1) Note: * designates county seats. 11

14 EXHIBIT D (Continued) FIRST BANK Summary Composite Ranking Results - By County and including County Seat County Ranking Data County Seat Data (for County Listed) County Market Rank Banking Rank Composite Rank City Market Rank Banking Rank Composite Rank County City County City County City County City County City County City County City County City County City County City County City County City County City County City County City County City County City County City County City County City County City County City County City County City County City County City