In certain situations, when a bank is failing, the FDIC may offer alliance bidding options.
The FDIC may offer alliance bidding to facilitate the resolution of larger banks with dispersed footprints or multiple business lines. Alliance bidding may be offered when:
- Multiple banks and asset buyers are interested in parts of a failing bank;
- Few banks are qualified to bid on the whole failing bank; or
- There is little interest in purchasing the whole failing bank.
Alliance bidding increases competition by allowing two or more bidders to submit a joint bid, including allowing smaller banks an opportunity to bid on larger failed institutions.
Alliance Bidding Process
When offering alliance bidding, the FDIC asks potential bidders if they wish to align with other bidders. Alliance bidders are required to sign confidentiality agreements, and may authorize the FDIC to convey their acquisition preferences to other qualified bidders.
Alliance Agreement Structure
The parties of the alliance will designate one party as the lead acquirer responsible for executing the multiple transactions of the alliance agreement. The lead acquirer executes the following:
- The Purchase and Assumption Agreement (P&A) with the FDIC on behalf of the alliance.
- The agreements with each alliance member.
Though the FDIC is not a party to alliance agreements, each bank entering into an alliance agreement must obtain approval from its regulators and chartering authority.
Alliance Bidding Options
- In order to execute a whole bank transaction, the lead acquirer can form alliances with other qualified bidders to bid on certain business lines, specialized lending operations, deposits, branches, or subsidiaries. In addition, assets may be offered as optional pools to qualified asset buyers in conjunction with the franchise sale offered to qualified banks.