How Dodd-Frank Makes M&A More Difficult
In the 1970s and 1980s, a major hurdle for almost any bank merger was the extent to which it could have an adverse impact on competition in a county or metropolitan area under federal antitrust laws. Those days are long gone. With a wave of mergers and acquisitions inevitable, a new set of regulatory hurdles have evolved for large financial entities and community banks alike.
Similarly, investments by private equity and hedge funds continue, but they also face heightened regulatory scrutiny directed at their post-investment control of the target bank. The remedies in those cases include passivity commitments, anti-affiliation certifications and affiliated transaction limitations, all of which are negotiable based on the nature of the investment, the role of the investor and type of affiliation that is contemplated.
Based on the transactions completed in the last few years, let's examine the range of issues that may impede consolidations and how banks should prepare for and approach them.
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