Success And Failure In Bank Auctions: Part Two

Last week we talked about a unique bidding process, which ended up being a success for the selling bank. This week we will look at an example of how not to conduct an auction.

Recently, after a more traditional auction process, the winning bidder began nitpicking the loan and investment portfolio. It wanted certain securities sold prior to closing and escrows set up for undesirable loans. After months of finagling, the deal died, and negotiations were initiated with the runner-up in the bidding. The lesson here is to know your weaknesses and be prepared to deal with them. Be strategic in the months leading up to the auction to eliminate loans or investments that may cause potential buyers to request price adjustments or reserves for risky loans or aggressive investments.