EN RU LV

ACQUIRING BANK IN EU 

The basic legal framework for acquiring a bank in the EU
is laid out in EU Directive 2007/44/EC
as regards procedural rules and evaluation criteria
for the prudential assessment of acquisitions
and increase of holdings in the financial sector.

There are many issues that arise during the process
and acquiring a bank requires a team
of very experienced advisors that have the power to bring
the project to a successful completion.

Banks EEA

Banking sector supervision in European countries is performed either by national banks or by specialised supervisory authorities.
READ MORE
  • Acquiring a bank is a very complicated transaction. Not only does it involve all the processes of acquiring any type of company but it also involves receiving financial regulatory approvals as well as dealing with politics which sometimes get in the way of successfully completing a bank acquisition.

    The nature of banks is different from most type of businesses because of the overall importance of banks in any economy.  A collapse of even a small bank can create a mini banking crisis which negatively affects the whole economy of a country with collateral financial losses many times larger than the direct losses of the bank.

    Therefore when acquiring a bank the acquirer not only needs to demonstrate that he has the funds available for the acquisition but in most cases he will need to show that he will be able to support the bank financially if the need arises.

    The basic legal framework for acquiring a bank in the EU is laid out in EU Directive 2007/44/EC as regards procedural rules and evaluation criteria for the prudential assessment of acquisitions and increase of holdings in the financial sector.

  • There are many issues that arise during the process and acquisition of a bank requires a team of very experienced advisors who have the power to bring the project to a successful completion.

    Our approach in acquiring a bank.

    1. Identifying targets
    2. Signing an engagement letter with the acquirer
    3. Analysing the targets
    4. Analysis of the acquirers ability and strategy behind  the planned acquisition
    5. Starting preparation of application documents for Financial Supervisory Authorities
    6. Negotiations with sellers
    7. Hiring local and well respected legal and financial DD teams
    8. Signing of Head of Terms with the sellers
    9. Presentation of the planned transaction to the FSA 
    10. Financial and legal DD of the target
    11. Application to the FSA including a business plan and strategic plan.
    12. Addressing possible questions from the FSA
  • 13. Negotiations and signing of the SPA
    14. After approval from the FSA – closing of the deal

    Identifying Targets

    At any time H2B will have knowledge about 10-20 banks in Europe that are for sale. Usually the potential acquirer will have a specific target country in mind. If we do not have information about banks on offer in that country we will find a bank for sale that satisfies the initial criteria of the acquirer if such a bank is at all available.

    Signing an engagement letter with the acquirer

    After it has been established that a target is available, the next step is signing an engagement with the acquirer – which lays out the scope of our work, responsibilities and fee’s.

    Analysing the Targets

    We analyse one ore more potential targets and establish an acquisition strategy together with the acquirer.
  • Analysis of the acquirer’s ability and strategy behind the planned acquisition

    Steps 3 and 4 are actually conducted jointly and draft documents are prepared for analysis of the potential buyer in regards to background, experience in the financial sector, financial standing, reputation etc.

    Starting preparation of application documents to Financial Supervisory Authorities

    The application documents take considerable time to prepare and we like to start preparing these documents at the early stages of the process to minimise delays because delays can be very costly for the acquirer and can put the transaction in jeopardy.

    Negotiations with Sellers

    Arranging meetings and starting negotiations with the sellers is the next step but before we start such negotiations we will have prepared a strategy for the negotiations and will have identified key issues that need to be negotiated. 
  • Hiring and local well respected legal and financial DD teams

    In depth research about local high reputation legal service providers with a fine reputation, meetings at potential legal offices and selection of the most respectful and appropriate partner forthe legal due-diligence, preparation of documents in the local language and contacts and  correspondence with the FSA.

    Choosing the local partner (the relevant branch of one of the big 4 auditing companies) for the financial due diligence, review of the business plan and adaptation of the plan for the specific expectations of the FSA

    Signing of Head of Terms with the Sellers

    We prepare a draft Head of Terms with the local legal team which we have chosen and then negotiate terms with the seller.

    Presentation of the planned transaction to the FSA

    After the Head of Terms has been signed we have a presentation of the planned transaction and hold a short informal meeting where we introduce the acquirer to the FSA
  • Financial and legal DD of the target

    Usually we will receive informal feedback from the FSA on how they view the planned transaction and if it is not negative then financial and legal due-diligence is conducted with respect to the target. The results will form the basies for the sales and purchase agreement also estimating the financing needs of the target in the nearest future. The DD results are also the starting points for preperation of the business plan that needs to be presented to the FSA.

    The result of the DD could also be that the acquirer decides to not go ahead with the planned acquisition and decides that we should look at another target instead.

    Application to the FSA including a business plan and a strategic plan.

    Since stage 2 of the process H2B has been preparing application documents to be submitted to the FSA for approval of the planned transaction. These documents need to be reviewed by the legal team before submission – all the required documents should be submitted at the same time including a business plan and a strategic plan for the bank moving forward.

  • The documentation volume is very extensive and needs to be completely consistent. The business plan will have been reviewed by the “big 4” we had selected for the financial DD before it is submitted.

    Addressing possible questions from the FSA

    The FSA will ask questions during the process  in regards to the documents submitted, usually for clarification of issues or requesting of additional information.  These questions need to be answered promptly and the information must be provided.

    Negotiations and signing of the SPA

    The Sales and Purchase Agreement will be based on the already signed Head of Terms, the DD results, and negotiations on reps warranties as well other issues that might have arisen during the process.

    After approval from the FSA – Closing

    As soon as the approval from the FSA has been granted, the parties immediately go for closing. This involves payments and transfer of shares.