THEME - COUNTRY BANKING
O ff the record - the diary of the deal
Buying a bank is not easy, even if it's a dream deal. The
challenge is to meticulously investigate a vast array of
issues, from human resources through to finance, within a very
short time frame. Following is a chronicle of events, from the
originator of the ACC deal, RI Dublin's Fergus Murphy. He
charts how industrious effort and solid teamwork got the ACC
deal done.
Final week, May 2001: We are formally informed that the Irish
Government is about to commence the sale of ACC Bank. ACC
is the third and final bank to be sold by the Irish Government as
part of its banking sector divestment program. RI Dublin gets
the go-ahead from the Managing Board to begin pre due dili
gence and draft an initial business case for Rabobank to acquire
ACC Bank.
Mid June 2001: The business case proves persuasive. We have
evidently picked a match between the two banks, ivith regards
to their agrarian past and strategie plans for the future. With the
Managing Boards approval we put forward a non-binding offer
for ACC.
End of July 2001: Pieter van der Weijden is appointed as RI
International Retail Director. We commence a more indepth
strategy paper. Tbis 100 page document is presented to RI's
Managing Board, lt includes a backdrop to the market, a
scrutiny of factors Rabobank should be watchful for and
recommendations concerning how ACC might fit within the
Rabobank Group.
July 8c August 2001: RI and Rabobank Nederland people from
across the network - from Credit, Compliance, Human Re
sources, Risk, Operations, Treasury, Audit, Taxation and Legal
join us in Dublin for the due diligence process. Around 20 peo
ple meet daily in ACC's lawyers offices to examine its business
in detail. Many of these people manage admirably to fulfil their
regular duties in addition to assisting with due diligence. Late
evening de-briefing sessions to revise and strategize are dutifully
accepted by those involved.
During this period thorough research uncovers a number of
areas which might affect the valuation of the company; these
included some legacy compliance and credit issues, which the
bank had during the 1990s. In fact, numerous banks in Ireland
had similar problems, however, ACC's seem greater for its small
size. Previous poor lending experiences are also reviewed and
subject to our keen inspection. We are pleased to note that the
management of ACC has already initiated a change program to
restucture the bank, addressing many of these significant issues.
This program and a voluntary seperation scheme already
underway are judged very positively by the Rabobank team.
September 6, 2001: Phase one of due diligence is finished and
the final investment proposal is submitted to the RI Managing
Board. Significant outstanding issues, concerning credit and
human resources demand a further month of due diligence. It is
taking a huge effort to keep the show on the road. I am grateful
to my hardworking team who have taken on extra volumes of
work. Every single detail is scrutinized. Eventually the due
diligence information indicates that we should move ahead.
October 17, 2001: A formal letter of offer to buy ACC is
submitted to the Irish government and price negotiations begin.
This too is a period of extremely exhausting work. Ideally you
want to delegate all regular responsibilities in order to solely
focus on the acquisition project, however this is not possible.
At times it is touch and go and looks like the deal might be
off- another party is interested. They're willing to pay more
but want to restructure the bank, butchering jobs and assets.
Although we are offering less money, we may be the favorable
choice for the government because we wilI support the volun
tary separation scheme already in place and we have the inten-
tion to grow the bank's business. In addition, our Triple-A
rating, top 25 position in the world and culture of sustainability
and social awareness, stand us in good stead with the Irish
government and their advisors, NCB Corporate Finance Ltd.
December 3, 2001: After countless conversations, working late
night after night, we finally agree a price and contract for the
acquisition. A number of deal sweeteners are obtained by
Rabobank from the government through this jnocess, but it's
been a very volatile process and a great learning experience.
'The devil is in the detail' as we all find out.
December 4, 2001: At 7 a.m. in the morning, having worked
throught the night with a team of lawyers and corporate finance
advisers, we sign for the purchase of ACC - to be executed on
February 28, 2002.
March, April, May 8c June 2002: An extensive set of comple-
tion accounts, upon which the final valuation of the bank will
be agreed by both parties, is painstakingly prepared. However,
the Net Asset Value (NAV) comes in much higher than we
expect. The government want us to pay 1 million for every 1
million in increased NAV. So begins a series of informal arbitra-
tion. We seek to reconcile the completion account numbers and
the year end audit numbers to protect Rabobank 's position,
very much feeling that the deal could turn sour at any time and
end up in a messy and costly adjudication process.
July 4, 2002: Finally we agree on the extra amount to be paid.
It's a fantastic deal because we are buying the bank for about 90
percent of its NAV and we have maintained a good relationship
with the government. The acquisition is now finally complete.
Celebrationary cheers and a few pints ofwell earned Guinness.
We draw a line under the project, feeling a little older and wiser
and quite proud.
10 I RI The Word I