Community Bank CEOs: How to Read Bank Sale Offers Like a Pro
The moment you've been waiting for finally arrives.
Five written offers for your bank sit on your desk.
Your heart pounds as you scan the numbers.
One offer looks amazing—until you read the fine print.
Another seems low but has no strings attached.
A third promises stock that could be worth more later or worthless if things go wrong.
How do you know which offer is really the best?
How do you compare cash versus stock?
What about all those conditions that could change the final price?
Here's how we analyzed our offers and chose the winner—and why the highest number isn't always the best deal.
The Weekend That Changes Everything
In our case, offers were due at close of business on Friday.
That gave our investment bankers the weekend to tear apart each proposal and build detailed comparison spreadsheets.
This analysis typically takes a couple of days because of its complexity.
Investment bankers need to contact each buyer to clarify unclear terms and confirm their understanding of specific conditions.
They reported their findings to me verbally the following Monday, but I didn't share anything with our board until we could all meet together.
Why Your Board Needs to Hear Everything Together
We scheduled an in-person board meeting for Wednesday.
This allowed schedule coordination and gave our investment bankers time to travel.
Here's why I didn't communicate anything to board members beforehand:
I didn't want to influence anyone's understanding of the offers before they heard the full analysis.
The board needed to hear all offers and the investment bankers' professional opinions at the same time.
This creates unbiased discussion and better decision-making.
What Your Investment Banker Should Present
During our board meeting, the investment bankers covered several key areas:
Net amount - What each offer was really worth after all conditions and changes
Per-share value - What shareholders would actually get for each share they owned
How you get paid - Whether offers were cash, stock, or a combination of both
Conditions - Requirements that could change the final price, such as investment portfolio performance, earnings targets, or contract endings
Transaction costs - Who pays for what during the deal process
People-related terms - Severance terms, roles for current management, and board seats
The Accountability Test That Matters
One thing impressed me about our investment banking team:
They compared the actual offers to their original valuation analysis from six months earlier.
This accountability piece gets easily overlooked, but it says everything about your banker's confidence and accuracy.
They weren't afraid to stand behind the value they had presented to our board when the process started.
Right or wrong, they made that comparison openly.
In our case, they were right on target.
The Three-Part Formula for Success
For any acquisition to work, you need three things:
- A willing buyer
- A willing seller
- Terms that everyone can agree on
When all three are present, it's usually a good time to sell.
As it turned out for us, the market was telling us we had willing buyers, and we were willing sellers.
But we still had work to do on the terms.
How Our Offers Broke Down
We received five offers that fell into two clear groups:
Two higher offers were close to each other in value.
Both were all-cash deals with similar valuations but slightly different conditions.
The main difference was in "people-related terms."
One offer would keep our management team essentially intact to lead the bank in our market under our existing brand.
The other had different plans for management and branding.
Three lower offers included stock or mixed cash-and-stock elements.
The risk that the deals wouldn't work was too great for the value presented, especially compared to the clean cash offers.
When you get this situation, it's usually best to thank the lower bidders for their time and interest, then focus on the serious contenders.
Why We Eliminated the Stock Deals
Stock offers can be tempting because they promise upside if the buyer's stock price rises.
But they also carry significant risks:
- The buyer's stock could drop after the deal closes
- You're betting on their management team and strategy
- There are usually more conditions and complications
- Integration challenges could hurt the stock price
When you have competitive all-cash offers, the certainty of cash usually wins unless the stock upside is compelling.
The Final Comparison Challenge
With two similar cash offers, we faced the challenge of getting one buyer to improve their terms enough to clearly separate from the other.
This approach carries risks, mainly around timing.
Time is rarely on your side in these situations.
The longer the process drags, the more likely something goes wrong.
But when offers are close, you owe it to shareholders to see if you can get better terms.
What You Should Know About Your Preferences
Before you ever get offers, think through these questions:
What would your shareholders prefer?
- All cash for immediate money?
- Stock in the buyer for potential growth?
- A combination that provides some of each?
What would you prefer personally?
- Cash to spread out your money?
- Stock if you believe in the buyer's future?
- A mix based on your financial situation?
Are you protected either way? If you and your key people have change-in-control and stay-put agreements, how you get paid might not matter as much to you personally.
The Emotional Reality Check
Reaching this point in a sale process brings up emotions you might not expect:
Have you thought about what it would be like to work for someone else after running your own bank?
Have you considered what you might do if you decide to leave at closing or shortly after?
It's worth noting that until you've moved on emotionally as well as physically, your exit isn't complete.
Reading Between the Lines
When analyzing offers, pay attention to:
Certainty of closing - Can this buyer actually complete the deal? Do they have regulatory approval history? Enough money?
Speed - How quickly can they move through document review and regulatory approvals?
Cultural fit - Will they treat your employees and customers well? Does their reputation match your values?
Hidden conditions - What could change the price between signing and closing? How likely are those conditions to be triggered?
The Questions Your Board Will Ask
Be prepared for these board questions:
- Why is this offer better than the others?
- What are the risks of this deal not closing?
- How long will the process take from here?
- What happens to our employees and customers?
- What role will current management play going forward?
Your Decision Framework
When comparing offers, consider:
- Certainty - How likely is this deal to actually close?
- Value - What will shareholders actually receive?
- Timeline - How quickly can this buyer move?
- Fit - Will this be good for employees and customers?
- Terms - What conditions could change the final price?
The Bottom Line
The highest offer isn't always the best offer.
You need to consider the total package: price, certainty, timing, and fit.
Work with experienced investment bankers who can help you analyze all aspects of each proposal.
Make sure your board understands not just the numbers, but the risks and opportunities of each deal.
Most importantly, don't let emotions cloud your judgment.
This is a business decision that should get the best value for shareholders while protecting the interests of employees and customers.
Your Action Plan
- Know your preferences - Understand what you and your shareholders want before offers arrive
- Prepare your board - Make sure directors understand how to evaluate complex offers
- Plan the process - Decide how you'll present offers to ensure unbiased discussion
- Consider all factors - Price is important, but certainty and fit matter too
Remember:
You'll probably only do this once.
Make sure you have the right advisors and take the time to get it right.
P.S. I'm not a lawyer, an accountant, or an investment banker. Just a former bank CEO who has been in your shoes.
There are zero hacks or tricks in this newsletter. Just proven tactics that help you choose the right path for your bank.
Your path will:
- Inform your strategic plan.
- Guide your annual business plan and budget.
- Clarify priorities.
- Define your message so it can be communicated with confidence.
This is how savvy bankers navigate.
They build smart and valuable banks and choose the best time to sell on a timeline of their own choosing – serving the needs of the shareholders and the board.
I’ll see you next week.
If you would like access to all prior newsletters - click here.
Not a subscriber? The newsletter is free - click here to become one now!
