Community Bank CEOs: How to Run Your Bank After Signing the Letter of Intent
You just signed the letter of intent.
The champagne is still cold, but reality is already setting in.
You have a framework for the deal, but nothing is final yet.
The real work is just beginning.
And here's the part no one warns you about:
You still have to run your bank as if the deal might fall apart tomorrow.
One wrong decision could derail everything.
One leak could destroy months of work.
The pressure is about to get much more intense.
Here's how to navigate the grinding months between signing the LOI and announcing the deal—and why this phase breaks more deals than any other.
The Harsh Reality of "Non-Binding"
The letter of intent is non-binding.
Both sides can still walk away.
But don't let that fool you into thinking it doesn't matter.
Remember the PGA-LIV merger?
They were at this exact stage when word leaked.
Over a year later, the deal still hasn't closed.
It's a mess that could have been avoided.
Confidentiality remains critical.
Maybe more critical than ever, because now you have a framework that people could speculate about.
What Changes Now
You've agreed on the basic terms:
- The buyer is willing to buy
- You're willing to sell
- You have a framework both parties can generally accept
Now comes the hard part: finalizing every detail in the definitive agreement (also called the merger agreement) and disclosure schedules.
The level of questions and document requests goes up dramatically.
Your deal team manages most of this process, working closely with legal counsel.
Your investment bankers step back somewhat at this stage.
The heavy lifting now falls on your deal team and lawyers.
The Grinding Work Ahead
There's no gentle way to say this: This phase is a grind.
Documents get shared directly with your legal counsel, who coordinates with the buyer's lawyers.
You'll be:
- Answering detailed questions constantly
- Gathering supporting documents
- Responding to legal counsel requests
- Reviewing everything the buyer needs to see
All the supporting documentation gets reviewed by the buyer.
Any single document could reveal something that delays or kills the entire deal.
The Parallel Workstreams
While working on the definitive agreement, you're also:
Preparing proxy materials for the shareholder meeting.
Shareholders will immediately ask two questions after the announcement:
- "When do I get my money (or stock)?"
- "How does the process work?"
Working on share conversion mechanics for closing.
The technical details of how shares convert need to be figured out now.
You and your deal team will be juggling all of this simultaneously.
The Secrecy Burden
You, the board, and the deal team remain the only people who know about the transaction.
Board approval happens after completing the definitive agreement.
Only then comes the announcement to customers, employees, shareholders, and the media.
Until that moment, you're running a bank with a massive secret that affects every decision you make.
Managing Through the Lens
Here's the challenge: You still need to run the bank normally, but now every decision must be viewed through a new lens—the terms of your deal.
Those terms aren't fully written yet, but you need to treat them as if they are.
One wrong move could put everything at risk.
Daily decisions that normally take minutes now require careful thought:
- Loan approvals that exceed certain thresholds
- Any major operational changes
- New contracts or vendor commitments
- Significant expense decisions
You're one of the few people who knows about "the lens," so you have to adjust your decisions accordingly without being able to explain why to most of your team.
The Nuclear Option Mindset
Balance is critical here.
Yes, you have a deal framework.
But this transaction could still fall apart.
A global crisis could derail it.
Remember, we've seen this happen—a pandemic shut down the entire economy and killed countless deals.
If the transaction doesn't move forward, your bank needs to keep moving forward without it.
Never forget that.
Don't stop making necessary decisions just because you have a deal pending.
The bank's health matters whether the deal closes or not.
The Dangers That Lurk
Several things could change the deal value, terms, or kill it entirely:
Operational problems:
- A large borrower announces financial difficulties
- A major cybersecurity event occurs
- A key employee leaves for another opportunity
Documentation issues:
- Supporting documents contradict what you told them
- Your representations and warranties can't be verified
- Undisclosed liabilities surface in due diligence
Any of these can damage your credibility with the buyer, putting the entire deal at risk.
When to Call Your Lawyer
When in doubt about whether a decision violates a deal term or changes the deal's nature, call your legal counsel immediately.
Don't try to interpret the agreement yourself.
Don't make assumptions.
Ask.
The cost of a quick legal consultation is nothing compared to the cost of killing your deal.
The Accountability Weight
The pressure during this phase is immense.
Everything that happens at the bank is ultimately your responsibility.
The bank must continue to perform well.
Any decline in performance could trigger renegotiation or deal termination.
You're accountable for:
- Maintaining financial performance
- Keeping operations stable
- Managing team morale (without them knowing why you're stressed)
- Preventing any material adverse changes
The Mental Strategy
Break your tasks into smaller pieces.
Focus on completing one, then the next one after that.
The old saying holds true: "How do you eat an elephant? One bite at a time."
Don't look at the entire mountain of work ahead.
Look at the next step in front of you.
Embrace the grind.
This is temporary, but it's necessary.
What Your Team Doesn't Know
Your team sees you making different decisions but doesn't know why.
They notice you're more cautious about certain approvals but can't ask you about it.
This creates its own stress.
You're managing their perception while carrying knowledge you can't share.
Find healthy ways to manage this pressure:
- Rely on your investment banker for perspective
- Lean on your board for support
- Talk with legal counsel when questions arise
- Remember this phase has an end date
The Light at the End
Once this grinding phase is complete, you'll bring the board back for final approval.
Then comes the announcement.
But until then, stay focused.
Stay disciplined.
Keep the bank performing and the deal moving forward.
Your Survival Strategy
Maintain performance: The bank's numbers must stay strong throughout this process.
Protect confidentiality: One leak could destroy months of work and your deal.
Document everything: Keep detailed records of all decisions and communications.
Consult counsel frequently: When in doubt, ask your lawyer before acting.
Break work into pieces: Focus on one task at a time to avoid being overwhelmed.
Remember it's temporary: This grinding phase ends when the definitive agreement is complete.
The Bottom Line
The period between signing the LOI and announcing the deal is the hardest phase of the entire sale process.
It's detailed, grinding work with high stakes and complete secrecy.
Manage your bank carefully, protect your deal terms, and keep everything confidential.
One mistake in any of these areas could cost you everything.
Your Action Plan
1) Understand deal constraints - Know what decisions require extra caution
2) Establish legal consultation process - Make it easy to get quick answers from counsel
3) Monitor bank performance closely - Watch for any issues that could affect deal value
4) Organize documentation proactively - Start gathering materials you know they'll request
5) Manage your stress - Find healthy ways to handle the pressure of secrecy
Remember: This phase breaks more deals than any other. Stay focused, stay disciplined, and keep grinding until you reach the finish line.
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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