US: Tougher antitrust laws lead to never-before-seen bank merger trends

FirstMerit Corp’s $912 million merger deal with Citizens Republic Bancorp, announced last September, has lead to a never-before-seen financing clause in the transaction, according to analysis. In order to secure successful transactions, banks are seeking new ways to ensure merger approval, such as FirstMerit’s strategy. FirstMerit was looking to secure funds to repay Citizens’ 2008 bailout; to do so, FirstMerit agreed to pay $1.01 for every dollar in debt from bond investors if the merger did not receive official approval within nine months. In a statement, Jerry Wiant of RBC Capital Markets – who advised FirstMerit on the merger – said that that type of financial agreement was the first of its kind for a bank merger. And analysts say that it’s part of a larger trend of banks finding new ways to ensure the approval of their transactions as antitrust scrutiny grows over the financial sector. Also part of a new trend, according to analysis, is the practice of including contractual “holdback clauses” which would allow companies to keep a portion of the amount they pay for M&A activity to secure funds in case of regulatory issues that might delay mergers.