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Sunday, 28 September 2014 22:00

WNJ’s Lewis provided calming influence over Mercantile Bank’s first acquisition

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Gordon Lewis, Warner Norcross & Judd. Gordon Lewis, Warner Norcross & Judd. PHOTO: KATY BATDORFF

Gordon Lewis worked on his first bank merger 40 years ago as a first-year associate at Warner Norcross & Judd LLP.

The deal involved three banks in Grand Haven, Traverse City and Owosso that were merging into Old Kent Bank.

Since that deal, Lewis has worked on nearly 100 bank mergers or acquisitions, representing either the seller or the buyer. He most recently served as lead counsel in Grand Rapids-based Mercantile Bank Corp.’s $151.5 million deal with the former Firstbank Corp. in Alma.

Lewis takes great pride in his role in the Mercantile/Firstbank deal that closed June 1. He calls what was described by executives at both banks as a “merger of equals” as a “fully positive transaction” where negotiations centered on what was the best way to bring the two corporations together, rather than how to get the best deal for your client.

“That was the extremely rare, true ‘merger of equals’ transaction,” said Lewis, whose role in the deal earned him MiBiz’s 2014 Dealmaker of the Year Award in the Adviser category.

“It was completely positive in the tone of the negotiations. When you negotiate a merger of equals, it’s a different sort of negotiation than if you’re buying someone or being bought. The merger agreement is entirely reciprocal. Whatever you give, you get,” he said. “We got to negotiate on the basis of ‘what’s the right thing to do in this particular provision of the agreement? What’s equally fair to both parties and how should this be?’”

Mercantile Bank CEO Michael Price calls Lewis a “true professional” who provided a calming influence in the first acquisition that Mercantile had ever done. Lewis kept the bank focused on “the proper order of things” and identifying “what you better look out for,” Price said.

Lewis’ lengthy experience in bank M&A proved invaluable during negotiations, Price said.

“It was great to have a resource like that,” he said. “He’s been around the block a few times. He knows how mergers can get off track and some of the big issues that pop up. He was very good at helping us plan and getting over any issues.”

The Mercantile/Firstbank deal is just one of the transactions that Lewis has advised on during the past year. He represented Spartan Stores Inc. in its $1.3 billion merger with Nash Finch Co. in 2013, worked with United Bancorp Inc. in Ann Arbor as it was acquired in January by Old National Bancorp of Evansville, Ind., and serves a lead counsel for Founders Financial Corp. in Grand Rapids that’s also merging into Old National.

“Things got a little hectic around here” in the last year, Lewis said.

That was a decided change of pace from the prior years. As an M&A attorney who specializes in bank transactions, he saw little activity during and after the 2008-2010 recession. The economic period and the resulting turmoil for the banking industry posed a challenge for his practice, Lewis said.

“As a lawyer, there’s nothing I can do to make a deal opportunity happen. In my business, we’re sort of at mercy to the marketplace producing deals for us to pursue,” he said. “You can be the best merger guy in the universe and from 2008 to 2013, there was the occasional deal.”

Now that economic conditions are better, the resulting rebound in M&A activity in the banking industry — as well as in the rest of the economy as a whole — represents opportunity, he said. The risk of buying has declined, contributing to an environment that’s more conducive for M&A activity, he said.

“If you were to acquire a bank, even a seemingly healthy bank, you didn’t know what landmines were buried in their loan portfolio that might spring up,” Lewis said.

With a healthy economy now and a few good years after the recession, banks are getting more comfortable with the risks of doing a deal, he said.

“Transactions will continue to occur as long as the economy is good,” Lewis said.

There’s no typical deal size that Lewis targets. He notes that he’s presently working on a merger involving a privately owned bank of less than $100 million in assets with a “quite small” purchase price. On the other end of the spectrum is the $1.3 billion Spartan Stores/Nash Finch transaction.

“Merger partners come in all sizes,” Lewis said.

Key to making a deal go smoothly for a client is teamwork among the attorneys involved, he said.

“When we do deals here, it’s not about me,” said Lewis, who takes on the role of project manager when handling a transaction. At the peak of the process, more than 20 people at Warner Norcross & Judd worked on the Mercantile/Firstbank deal, he said.

“Everybody knows their job. Everybody has done this before, and everybody works as a team and we get it done,” Lewis said.

Lewis notes that the pace of accomplishing the legal work helps to make a transaction succeed.

“When we start into a major acquisition transaction, we drive night and day to get everything done as soon as we can because time has a way of killing deals. You just never know what the future is going to bring, and the day you could have brought it in earlier is the one day that causes a corporate or world event that makes the deal impossible,” he said.

When they seek a transaction, sellers in the market need to make sure they “spiff themselves up,” just as people would do to their home when they put it up for sale, and “pick the right time” to get the maximum price.

On the buyer side, “it’s all about evaluating value and risk,” he said. “You have to get comfortable with accepting risks in transactions. You have to evaluate them as best you can so you know what they are, and manage them.”

Active buyers typically have a set process to follow for each transaction, Lewis said. Old Kent Bank, for instance, “had a well-oiled team” of executives and attorneys that handled acquisitions and “didn’t need a whole lot of advice. They needed execution,” he said.

The greater need for legal advice is on the seller’s side. After all, Lewis notes, the owners of a business can only sell it once.

“When you are representing sellers, you typically are advising a completely inexperienced group,” he said. “Every sell-side engagement I’ve had — directors and officers, they’ve never done this before. They need advice and guidance on how to conduct the process.”

Sidebar: Winner - Dealmaker/Adviser

  • Gordon Lewis
  • Company: Warner Norcross & Judd
  • Business description: Grand Rapids-based law firm with offices in Grand Rapids, Holland, Kalamazoo, Muskegon, Lansing, Midland, Southfield and Macomb County
  • Best practices for effective deal-making: “Know your client and your client’s merger partner very well.  Understand their businesses, what motivates the transaction and what issues are likely to be important to them,” he said. “Identify and analyze any comparable prior transactions by both your client’s proposed merger partner and the law firm advising them.”
  • Personal information: Resident of East Grand Rapids. Wife, Jo; two adult daughters
  • Academic degrees: He earned his law degree at the University of Michigan in 1974 and an undergraduate degree in environmental science at Michigan State University in 1971.
  • Community involvement: Serves on the board of directors of the Little Manistee Watershed Conservation Council

 

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