CHAPTER 5

Preliminary Valuation for Deal Pricing

Any banker will tell you that successfully managing the due diligence and acquisition process is not easy.

—Jim Wilkson,

President and CEO, BankSmart,

Petersburg, Florida1

The valuation and evaluation of banks in connection with a contemplated bank M&A transaction generally occur in the preliminary phase of sizing up a transaction. This preliminary due diligence is the main subject of this chapter. The concepts of preliminary due diligence and valuation/evaluation are inextricably intertwined and, if satisfactory, set the pattern for confirmatory due diligence, the subject of Chapter 6.

Preliminary due diligence (the evaluation phase) includes by necessity the more formal valuation of the target. ...

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