Community Bank CEOs: Your Last Chance to Negotiate Before Signing
Seven months of grueling work has led to this moment.
You've narrowed it down to two offers.
Both buyers are waiting for your decision.
Your board is tired.
Your team is stressed.
Everyone wants to just pick an offer and be done with it.
But here's what you need to know:
Once you sign that letter of intent, your power to negotiate disappears forever.
This is your last chance to get the terms you really need.
The question is:
Do you have the courage to ask for what matters most when everything is on the line?
Why This Moment Matters More Than Any Other
You've reached the point where you have a willing buyer, a willing seller, and terms that could work.
When all three exist, it's usually a good time to sell.
But "could work" and "should work" are two different things.
Right now, at this exact moment, you have maximum leverage.
Both buyers want your bank.
Neither has a signed agreement.
They're both invested in making this deal happen.
Once you sign a letter of intent, that leverage vanishes.
Even though letters of intent are "non-binding," they become very hard to change in practice.
The Questions That Determine Your Future
Before making any final requests, ask yourself these critical questions:
Is what you're asking for a deal-killer?
If you don't get this term, will you walk away from the entire deal?
If the answer is no, maybe it's not worth the risk.
Is what you're asking for going to get a deal done?
Make sure you're asking for the real reason, not creating an excuse to back out.
If they grant your request, are you truly committed to moving forward?
Is there enough goodwill with the buyer to make the request and still have a deal if they say no?
Will you regret not asking?
Your natural instinct will be to take the easy path and just accept the offer.
But it's your duty to your shareholders to explore every option.
The Most Common Last-Minute Requests
Here are the types of issues that typically come up at this stage:
Price floors: If the deal includes conditions that could lower the final price, you might need a minimum price guarantee.
This gives you the option to walk away if the price drops too low.
Consideration mix: Maybe you need more cash and less stock, or vice versa, based on your shareholders' preferences.
Timing protections: If delays could hurt the deal value, you might need deadlines and penalties for missed targets.
Social terms: Additional protection for key employees or community commitments that matter to your stakeholders.
The Shareholder Reality Check
Remember who you're ultimately answering to: shareholders who are likely friends, family, and people you'll interact with for the rest of your life.
You need their vote to complete the deal.
When you present the terms, they'll hear the price first and the conditions second.
Even if you explain all the "subject to" clauses, they'll focus on the headline number.
Make sure that number and those terms are ones you can defend for years to come.
Planning the Conversation
Don't wing this crucial discussion.
Plan it carefully with your investment bankers and board:
Role-play different scenarios:
How might each buyer respond to your requests?
What if they say yes?
What if they say no?
What if they counter-offer?
Prioritize your requests:
If you can only get one thing changed, what matters most?
Price?
Terms?
Timing?
Prepare for different outcomes:
Your board should provide direction for multiple scenarios - price increases, term improvements, no changes at all.
Understand the differences:
Each buyer will have different constraints and capabilities.
One might be able to increase price but not change terms.
Another might improve terms but not price.
The Risk of Deal Fatigue
After seven months of work, everyone is exhausted.
Buyers might say they're done negotiating, that they can't see working with you going forward if you keep pushing.
This is often a negotiating tactic, but sometimes it's real.
You need to judge whether the relationship can handle one more round of discussions.
If you're not okay with the buyer walking away, think very carefully about making additional requests.
What Your Investment Banker Needs to Know
Your investment banker needs clear direction about priorities and flexibility:
- What happens if Buyer A raises price but doesn't change terms?
- What if Buyer B improves terms but keeps the same price?
- What if both buyers refuse to move from their current positions?
- What's the minimum acceptable outcome for each scenario?
Clear communication prevents confusion during crucial negotiations.
The Envelope Test
Here's a practical exercise:
Write down the price and terms you would accept for your bank right now, in cash.
Be specific about the numbers and conditions.
Put that paper in an envelope and seal it.
If you find yourself in active negotiations, it's easy to get caught up in a "we can get more" mindset.
Open that envelope and look at what you wrote when you had a clear, realistic picture of your bank's value.
This keeps you grounded when emotions and deal momentum take over.
The Commitment Test
Before making any requests, know this:
You might get everything you ask for.
If they say yes to all your terms, are you 100% committed to moving forward and closing?
That answer must be yes.
If it's not yes, you need to understand why.
Are you having second thoughts about selling?
Are you worried about the terms?
Are you not ready for this step?
Address those concerns honestly before making requests you might not be prepared to honor.
Reading the Buyer's Position
Pay attention to signals during these final discussions:
Good signs:
- Quick responses to your requests
- Willingness to discuss alternatives
- Focus on finding solutions rather than problems
- Continued enthusiasm about the deal
Warning signs:
- Long delays in responding
- Frustration with additional requests
- Questioning the value they're already offering
- Suggestions that you're being unreasonable
The Different Conversations
Each buyer conversation will be unique based on their current offer:
Buyer A might need to raise price but everything else is acceptable.
Buyer B might need to raise price and change several terms.
Tailor your approach to each buyer's situation and constraints.
When to Hold and When to Fold
Sometimes the best strategy is to accept the current offers without additional requests.
This might be the case if:
- The offers already exceed your expectations
- You sense the buyers are at their limit
- The relationship is strained from previous negotiations
- Market conditions are changing in ways that hurt your position
Trust your instincts and the advice of experienced counsel.
The Bottom Line
This moment - right before signing the letter of intent - is your last real chance to improve the terms of your deal.
You've invested seven months and significant resources to get here.
Don't let fear of rocking the boat prevent you from securing the best possible outcome for your shareholders.
But also don't let greed or perfectionism kill a good deal.
Know the difference between optimizing and overreaching.
Your Action Plan
1) Write down your minimum acceptable terms and seal them in an envelope for reference
2) Role-play different scenarios with your board and investment banker
3) Prioritize your requests from most to least important
4) Assess buyer relationships and capacity for additional negotiations
5) Commit to moving forward if your requests are granted
Remember:
Your leverage will never be higher than it is right now.
Use it wisely.
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 hope you found this short lesson helpful.
What are your thoughts?
I’ll see you next week.
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