We know that Dodd-Frank legislation has created many challenges for the financial services industry, but what impact do the regulations have on merger and acquisition (M&A) activity? This week’s FIN News Alert looks at the Bank Director article, “How the New Regulatory Environment Could Change Bank Mergers and Acquisition,” and takes a deeper look at the evolving climate for M&A activity. Here are the highlights:
- In the post-Dodd-Frank business world, the regulatory environment is creating new challenges that may reshape some of these basic M&A activities.
- Regulators increasingly see mergers as a time to scrutinize the buyer — its compliance record, systems, capacity to integrate and general good standing.
- In its September 2015 approval of M&T Corp.’s acquisition of Hudson City Bancorp, the Federal Reserve starkly warned that if an examiner identifies a material weakness in an acquiring bank, it will expect the bank to withdraw its application and resolve the issue before proceeding with the transaction.
- Already, this regulatory focus has led targets to perform regulatory diligence on buyers, even in cash deals.
- Targets should and are already trying to protect themselves and avoid buyers that may have regulatory risk and in turn might spoil the transaction.
- It may be very difficult to determine with certainty the cause of a regulatory obstacle, which could lead targets to seek greater protection for any regulatory failure. The results could be breakup fees or could affect several M&A provisions.
- A further outcome could be longer delays and greater volatility, creating even more challenges associated with the transaction.
Want to learn more about navigating the world of compliance for banks and credit unions? Read more in this white paper, “How Technology Helps Banks and Credit Unions Meet Regulatory Mandates,” for the latest insights.