James Kaplan's law firm was negotiating a handful of bank mergers when the stock market collapsed last month. All of them are bogged down in new squabbles over whether the seller can say "deal's off" if the buyer's shares tank. "It is a big issue right now. I have a deal that is on the rocks because of it," says Kaplan, partner and chair of Midwest banking practice of DLA Piper in Chicago. "In today's market it is all about price protection."
Talks over so-called walk-away rights in stock-swap deals are always touchy. But they are becoming deal breakers after the steep drop in bank stocks in recent weeks. The sell-off underscores the risks of paying for mergers with stock. Most deals have at least some stock component because banks are wary of depleting capital. Relying on stock as currency can punish either party if one institution has a huge swing in market value.
Register or login for access to this item and much more
All Bank Investment Consultant content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access