Inside the Mind of the Serial Acquirer: In Which We Look at Two Very Different, but Successful, Models for Growth by Acquisition

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Many banks want to do an acquisition, and many do, but it's a stiff learning curve, says Terrance "Terry" McCarthy, senior executive vice-president and chief operating officer of First Banks, Inc., Clayton, Mo. "You're better off if you do it regularly," he says.

He should know. The one-bank holding company has been acquiring banks for 20 years, including 20 bank acquisitions in California alone. That run has propelled the family-owned company to $9.7 billion in assets with 186 branches in Missouri, Illinois, Texas, and California.

Montana-based Glacier Bancorp has been at the acquisition game almost as long, buying 15 banks (including one large thrift) over 19 years. It now has banking offices in five western states. But Glacier, a $4.1 billion multibank holding company, has followed a markedly different model than First Banks.

These two companies fall within the subset of the bank M&A market labeled "serial acquirers" or, if you prefer, "active acquirers." There is no official definition of those terms, but a good rule of thumb could be companies that have done five deals since 2002, according to Curtis Carpenter, managing director, Sheshunoff Investment Banking, Austin, Tex. There are 23 such companies currently active, he notes (two others were acquired themselves). Collectively they accounted for 167, or 12.8%, of the 1,305 bank and thrift deals done since 2002.

What motivates these repeat buyers? What pricing patterns do they follow? What approach do they take to integration and consolidation?

Interviews with First Bank's McCarthy and Michael "Mick" Blodnick, president and CEO of Glacier Bancorp, provide answers to these questions and offer a good look into the world of the serial acquirer.

One of our core businesses

Despite a common interest in growing by acquisition, First Banks and Glacier have some significant differences, one being ownership. The former is privately owned by the Dierberg family and trusts. There are no public shares, although it is an SEC filer by virtue of its trust preferred securities. By contrast, 54% of Glacier is owned by institutional investors.

McCarthy states clearly that one of First Banks' core business lines is to acquire banks. The company began slowly, picking up a bank or two in the St. Louis market in the '80s, then making its first out-of-market acquisition in Texas in 1994. Last year, First Banks completed six whole-bank acquisitions.

In the early days, chairman Jim Dierberg used to make quite a few cold calls on banks. But today, says McCarthy, "most opportunities are brought to us by investment banks." Sellers feel pressured by shareholders now to market themselves more widely, he explains.

While acquisitions remain a very important part of its business plan, says McCarthy, the company's current strategy is to gain a presence in a market by an acquisition, and then branch out from there.

Glacier's main acquisition driver is to profitably leverage its shareholders' capital. "We're stewards of that capital," says Blodnick, "and we want to do the best job of managing it."

The company recognized some years ago that the markets where it operated then-northwestern Montana--were heavily dependent on the cyclical timber and tourism industries. Looking to diversify both geographically and financially, Glacier decided to grow through acquisitions because building de novo facilities would take too long. Beginning in earnest in 1996, the company began to aggressively court banks in other markets. A thrift deal in 2001 doubled its size to $2 billion.

More recently, says Blodnick, the need for deposits has become an acquisition driver, a trend that Sheshunoff's Carpenter confirms is growing in importance.

All for one or one for all?

An even bigger difference between Glacier and First Banks than ownership, is how they operate. First Banks is a consolidator--it has one charter, one name, with regional presidents. …