Bank Ownership Levels Made Acquisition Work Tougher For Gunster Partner
The Deal: The Gunster partner assisted Fort Lauderdale-based Stonegate Bank in its acquisition of Pompano Beach-based Florida Shores Bancorp. The $48.8 million transaction closed Jan. 16.
Details: Putting together a multimillion-dollar bank acquisition can be complicated enough no matter the circumstances. In this buyout, however, dealmakers had to deal with an additional quirk that Bader said made the heavily regulated process even more convoluted: a corporate structure within the target acquisition that forced the buyer to negotiate with both the target bank holding company and its individual units.
Stonegate completed the purchase of Pompano Beach-based Florida Shores Bancorp and various subsidiaries on Jan. 16. Stonegate paid $48.8 million in a cash-and-stock transaction that substantially raised the amount of assets on its balance sheet to $1.7 billion. Stonegate Bank had nearly $1.1 billion in assets prior to the deal.
To get to the closing, Stonegate negotiated with Florida Shores as well as the minority shareholders at two other banks affiliated with the holding company. The Fort Lauderdale lawyer said the multilevel negotiations added a level of difficulty to executing the deal. The two subsidiaries were Florida Shores Bank Southwest headquartered in Venice and Pompano Beach-based Florida Shores Bank Southeast. The deal gives Stonegate new branches in Broward, Palm Beach, Lee, Sarasota and Charlotte counties.
"There was added complexity in the fact that there at Florida Shores, they had minority shareholders at two bank levels," Bader said. "Instead of the typical deal, where you would have one shareholder meeting at the holding company level, each bank had a meeting. And then the bank holding company had to have a meeting as well to reconcile everything, and that made the process more complex."
Typically, for a bank of Florida Shore's size, "you would see a holding company with various shareholders," he added, "Here, you needed to negotiate with the holding company as well as merge the banks in the process."
The complex structure not only affected negotiations but also created issues that needed to be ironed out with federal and state regulators, he said. The deal took about a year to come together.
Still, Bader suggested the deal created a "good symbiotic relationship" for the banks, regardless of the added complexity. And he suggested other mergers of moderately sized community banks were in the pipeline.
"The key is that nowadays with the added regulatory burden, you really want to have a larger balance sheet to help absorb those regulatory costs," he said. "There's some level of thinking that banks that are in the $100 to $400 million range, that those banks are looking to partner up or to size up, essentially so they can deal with this larger regulatory structure."
Background:Bader leads the financial services and banking practice at Fort Lauderdale-based Gunster.