Positioning for a Texas Merger Boom; Calif. Investment Bank Hoefer & Arnett Opens Shop in Austin

By Kaplan, Daniel | American Banker, December 6, 1994 | Go to article overview

Positioning for a Texas Merger Boom; Calif. Investment Bank Hoefer & Arnett Opens Shop in Austin


Kaplan, Daniel, American Banker


Hoping to cash in on a boom in bank acquisitions in Texas, the investment bank Hoefer & Arnett Inc. will open an Austin office next month to advise the state's more than 700 community banks.

The San Francisco-based firm has hired Thomas R. Mecredy, an investment banker with Alex Sheshunoff & Co., to head the office. Joining him will be Denna Mc-Ghee, also an investment banker with Sheshunoff.

The opening of the new office reflects a growing belief that the Lone Star State could be fertile ground for bank merger business.

About 50 Texas banks have been acquired so far this year, compared to the dozen or so in each of the past few years, according to one estimate.

While Texas banks now enjoy profitability after the dark ages of the late 1980s - when all but a handful of Texas' leading independent banks and thrifts either failed or were acquired - M&A activity has been slow to arrive.

But Hoefer & Arnett hopes this year's uptick is a signal that the lean years for Texas bank M&A are over.

"The performance of Texas banks is better, the level of activity is increasing, the prices that are being paid for banks are increasing, and the interest of out-of-state buyers is increasing, so we feel in Texas and the Southwest there is going to be a lot of activity over the next few years " Mr. Mecredy said.

The new office's focus will be Texas, but Mr. Mecredy said he hoped to expand into neighboring Louisiana and Oklahoma and as far away as Florida and Georgia.

If successful, Hoefer & Arnett would suddenly move from being a one-state firm to one with a national profile.

Earlier this year, Hoefer's bank analyst, Steven J. Didion, initiated coverage on 18 Texas banks. (See map above.)

Murray G. Bodine, a partner with Hoefer, said the firm hopes to translate its success in California into Texas, which is dominated by small, privately held banks.

Roughly 20% of Texas banks control assets of between $100 million and $500 million, and 77% have less than $100 million of assets.

Only a dozen or so banks are even publicly listed, and only one - BancTexas - is listed on the New York Stock Exchange.

Roughly 20 Texas banks are listed on bulletin boards, and the rest are privately held.

That marketplace has been ignored by many of our competitors, and we believe that is where a lot of the activity will be taking place," said Gregory H. Madding, a principal in the firm.

Hoefer found a similar situation in California in the early 1980s when it set out to provide liquidity to the banks there.

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