More banks are turning to M&A to acquire talent

An intensely competitive labor market has increased the importance of acquisitions for filling key posts.

CenterState Bank, WesBanco and Prosperity Bancshares are among the banks that are adding talent through M&A. Community First Bancshares and BB&T (to be renamed Truist Financial) will eventually have new CEOs as a result of pending deals.

The chief takeaway is that bench strength matters, industry experts said. The battle for talent will only intensify as banks compete against each other and nonbanks such as hedge funds, fintech and credit unions for the best hires.

"There are just too few well-trained people out there ready to step up" into top management, said Rod Taylor, CEO of the executive recruiting firm Taylor & Co. "That's why you see executive retention as a key consideration with M&A."

“At smaller banks, it’s just tough right now to have the right people in place and ready to step up when the CEO retires,” said Jacob Thompson, a managing director of investment banking at SAMCO Capital Markets. “Buyers can add talent and leadership depth; that is a big part of the M&A opportunity.”

The $17 billion-asset CenterState, which recently bought National Commerce in Birmingham, Ala., decided to shore up the deal’s financials early in negotiations so the banks could devote more time discussing how to keep top talent in place.

Employee retention “has been a driver for us,” said Chris Nichols, the Winter Haven, Fla., company’s chief strategy officer. “For us, it’s made a huge difference to be able to pick up talent and match them with important positions at our top levels.”

Richard Murray, previously National Commerce’s president and chief operating officer, became CEO of CenterState’s bank. Other National Commerce managers joined CenterState after the deal closed.

“We're very excited about the strength and runway ahead for our combined management team,” CenterState President and CEO John Corbett told analysts during a November 2018 conference call to discuss the deal.

When the $12.5 billion-asset WesBanco agreed in July to buy the $3.1 billion-asset Old Line Bancshares in Bowie, Md., it emphasized the role talent acquisition played in making that deal ⁠— and others within the industry ⁠— happen.

Mark Semanie, Old Line's chief operating officer, will become WesBanco's Mid-Atlantic market president as part of the Wheeling, W.Va., company’s push into Northern Virginia and Washington.

Old Line “will represent the sixth consecutive merger where key top executives joined and stayed with WesBanco,” Todd Clossin, WesBanco’s president and CEO, said during a conference call after the deal was announced.

A need to pair leadership experience with market expansion also played out in Community First Bancshares’ pending purchase of ABB Financial Group in Atlanta. The $305 million-asset Community First agreed earlier this month to buy the $308 million-asset ABB.

In addition to adding scale and diversifying the product mix at Community First, the deal will put the former mutual, which is based in Covington, Ga., into high-growth areas around Atlanta.

“So their talent, including at the top, was a very important consideration” as negotiations progressed, said Johnny Smith, Community First’s president and CEO.

Ed Cooney, ABB’s top executive, will succeed Smith as CEO. Smith will remain president.

“That focus on talent is always going to be there for us,” Smith said in an interview.

The $22.4 billion-asset Prosperity will have a new president when it buys the $9.9 billion-asset LegacyTexas Financial Group in Plano.

Kevin Hanigan, Legacy’s president and CEO, will become Prosperity’s president and chief operating officer, while J. Mays Davenport, the seller’s chief financial officer, will become director of corporate strategy at Prosperity Bank.

David Zalman will remain the company’s CEO.

Six Legacy executives signed three-year contracts with Prosperity, Hanigan noted during a June 17 call to discuss the deal. All of Legacy’s top-tier lenders, or more than 20 individuals, signed two-year deals. The banks are working to keep more employees.

Of course, M&A isn’t a cure-all for bank vacancies, particularly at fast-growing institutions. Expect many of those banks to continue to aggressively scout out and hire talent from competitors, or look to more deals to fill other gaps.

Not every bank can snag talent through M&A, Taylor noted. That requires creative thinking when unemployment is low.

Banks that aren't in a position to acquisitions "have to identify a candidate, pay them well and do things like provide equity stakes in the institution," Taylor added. "It also helps to have a convincing story that the stake will increase in value."

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