Caution is the watchword in the financial services industry, and with bank M&A activity “cautious” at best in the current environment, institutions and their boards are more often faced with limited, if any, near-term alternatives for potential strategic combinations. Acquisition options are virtually non-existent for some, and boards must be prepared to face the reality that they may need to buckle in for a long ride and examine and implement measures to improve the operations and survivability of their institution, even if on an interim basis while the institution waits for an appropriate suitor. The “Home Alone” ongoing independence option, whether the result of strategic analysis and affirmative decision-making and policy or simply the result of a lack of alternatives, is a very real scenario for many institutions.

For institutions exploring the potential for a sale without the certainty (or perhaps even the likelihood) of an acquisition by a stronger institution, it is important to be prepared to implement the difficult measures necessary to tough it out and to survive independently, at least on an interim basis until a viable transaction emerges. This “Home Alone” scenario can be a challenging environment in light of shareholder and regulatory pressures, but one that needs to be carefully considered and planned for in light of the alternatives (or perhaps lack thereof) and the reality of the present marketplace.

A “Home Alone” scenario, whether short or long-term, includes undertaking a comprehensive, objective self-assessment process and the potential for implementing difficult strategies and decisions with regard to market and business contraction; staff, board and management changes; asset sales and branch divestitures; and a plethora of other measures that may be required to survive without a viable takeout merger partner. The record of board exploration of alternatives leading to adoption of those strategies must be carefully documented to evidence the board’s due diligence (including use of experts), analysis, deliberations and objective due consideration of the issues and alternatives at hand.

Coupling current bank stock pricing with continued economic and political uncertainty in the present environment, boards cannot afford not to carefully consider the “Home Alone” scenario, even if they intend to eventually combine with another institution. Potential buyers are cautious and skeptical, and in many instances have issues of their own to address before they are in a position to undertake a combination. Capital may be unavailable or too expensive, and available acquisition cash can be thin. As bankers know all too well, the problems experienced very publicly by the large institutions have had a “splash” effect on all institutions, irrespective of size, location, charter or portfolio quality, which has adversely impacted strategic alternatives and opportunities otherwise available in a “normal” banking industry market.

Influencing Factors

The “Home Alone” scenario, even if temporary, involves consideration of a number of important strategic operating issues including availability of additional capital (if necessary), potential market divestitures and/or asset sales, potential board and management changes, customer issues, shareholder concerns (including potential dividend reduction or elimination), potential debtholder issues (where applicable), personnel retention and employee morale issues, potential adjustment of compensation structures and incentives, perceived weakness by competitors and customers, and a plethora of other operating and strategic considerations.

Regulatory and shareholder pressures can be overwhelming. Those pressures alone have been known to influence institutions and their boards to lean toward a quick sale with pricing that may or may not reflect the potential enhanced long-term value that could have been otherwise obtained with patience and some interim institutional “repair work.”

Personal issues and concerns can and often do become paramount in a challenging business environment. Care should be taken to avoid internal rifts between the board and management and among board members. It is important to recognize that all are in the situation together and to proceed as a cohesive unit if the strategy is to be successful. If changes in the board or management are to be considered, they should be addressed carefully and thoughtfully with recognition of potential shareholder, regulatory and community perception and impact.

None of it is easy, and for potential sellers, keeping an objective “eye on the ball” is a challenge in what tends to be a stressful and emotional time for the institution and all involved.

Examining Alternatives

As usual, there is no “once size fits all” and each institution must analyze its strategic alternatives in light of individual circumstances and long-term plans and objectives. In their fiduciary role, directors are required to consider alternatives facing the institution in light of the best interests of their constituencies. The analysis can be challenging in a normal operating environment and becomes even more complicated when facing the excruciating real world pressures of a challenging business environment. While a quick sale can take the focus off of operations and provide a distraction for shareholders and regulators, the price and/or purchaser securities may not provide compensation that is equal to, or better than, that which could have been secured by remaining independent and accepting the time, expense and potential uncertainty of the “Home Alone” scenario. In certain instances, there may be no viable buyers and no alternative. Boards should secure a detailed analysis of the relative cost and risk from experienced and objective independent advisors in any and all instances, and document that activity and recommendations carefully in light of the secondguessing that is virtually certain to occur.

For community banks, it may not be a bad time to be “Home Alone” as they take advantage of market opportunities created by issues with larger institutions. With the lack of potential acquirers, it may be the ideal time to capitalize on opportunities to secure further market share, shore up operations, focus on profitability and increase short and long-term shareholder value.

In all instances, the use of experienced advisors, including financial consultants, investment bankers and legal counsel, is critical to provide independent and objective advice necessary to examine the relative pros and cons and to assist the board in its decision-making process. Boards should carefully and strategically document their efforts and their analysis to create an appropriate record of the exercise of their fiduciary duties.


The “Home Alone” scenario requires careful attention to communication with shareholders, regulators, employees, customers and the community to avoid inadvertent and unfortunate misunderstandings that can have a devastating impact on the institution’s plans. “Reputation risk” is a significant concern and missteps can result in a self-fulfilling prophecy. The process requires a careful balancing of interests and strong credibility on the part of management and the board to create an environment of continued patience by a number of constituencies, including shareholders and regulators, while the institution undertakes a difficult and challenging path to address issues necessary for its survival and/or preparation for eventual sale.

“Home Alone”

A successful “Home Alone” experience, whether temporary or permanent, can result in the institution becoming a stronger, healthier and more profitable organization that is in far better condition to make objective decisions regarding its future in a thoughtful and less-pressured manner. It can cause the institution to carefully analyze and consider options and alternatives that it had not considered in the past and perhaps would not otherwise consider, and to take actions which it may otherwise not take that can have a strong positive impact. It is not without risk and some pain, however, and is subject to significant pressure and potential for failure. There may or may not be a viable alternative for the institution, and whether temporary or otherwise, the “Home Alone” scenario is one of the many important alternatives to be carefully (and realistically) considered by the board as it analyzes the short and long-term prospects for the institution and the best interests of their constituencies.