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Published in Finance

ChoiceOne’s two recent acquisitions provide lessons on virtual dealmaking

BY Sunday, February 14, 2021 05:50pm

The two acquisitions ChoiceOne Financial Services Inc. closed over a 15-month period tripled the size of the Sparta-based bank holding company.

ChoiceOne first acquired County Bank Corp. in Lapeer, the parent company of Lakestone Bank & Trust. Billed as a “merger of equals” because of the banks’ similar size and culture, the $89 million all-stock deal that closed Oct. 1, 2019, doubled ChoiceOne’s assets to $1.3 billion and included 14 offices in parts of Lapeer, Macomb and St. Clair counties. After the deal closed, ChoiceOne moved from the OTC to the Nasdaq exchange, giving its shares greater liquidity and trading under the symbol COFS.

ChoiceOne Financial Services President and CEO Kelly Potes. MIBIZ PHOTO BY KATY BATDORFF

Just three months later, ChoiceOne announced another deal with the acquisition of Community Shores Bank Corp. in Muskegon. The $21.5 million cash-and-stock transaction that closed July 1, 2020 added four more offices to ChoiceOne’s branch network — three in Muskegon County and one in Grand Haven — and more than $244 million in assets, extending the bank’s presence in the lakeshore market.

Today, ChoiceOne Bank has 33 offices in West and Southeastern Michigan with $1.91 billion in total assets, plus a deeper talent bench and greater ability to absorb the high cost of technology and regulatory compliance.

“They’ve really given us some scale, which has been very good for our clients, our employees and our shareholders,” President and CEO Kelly Potes said.

The two acquisitions won ChoiceOne Financial Services a 2021 MiBiz M&A Deals of the Year Award in the finance category.

As a much larger bank, ChoiceOne today has a higher in-house lending cap of $17 million, compared to $10 million previously. The ability to write larger loans enables ChoiceOne to retain commercial clients as they grow, rather than refer them to another lender or syndicate a large credit request.

“It allowed us to grow with our clients and to handle bigger relationships and not have to look at any participation with other banks,” Potes said. “We can handle the client’s whole needs at the bank. That was very much a big plus.”

ChoiceOne completed the integration of Lakestone Bank & Trust in May 2020 during the COVID-19 pandemic. The Community Shores Bank acquisition was publicly announced just prior to the pandemic’s outbreak and work to close the deal and integrate the bank into ChoiceOne was done virtually.

Going through that process virtually reinforces the best practice that a cultural fit remains the key to a good deal. That fit made both acquisitions go well, Potes said, particularly in the County Bank deal in which ChoiceOne’s senior management team post-transaction was an equal mix of executives on either side of the state.

“When you’re looking at doing a deal, it’s not all about pricing, but also culture. Luckily we were blessed with the fact that we have a good cultural fit with both of these transactions, especially when we did the merger of equals with County Bank Corp. Because the sizes were so similar and you’re bringing together two management groups, you really needed to have a good relationship going into that, and we have,” he said.

Despite the challenges of having to virtually integrate the ChoiceOne and Community Shores systems, “it went very well without a hitch,” Potes said. Knowing the Community Shores leadership well helped to smooth the integration process, as “everybody just rallied together and we made it happen,” he said.

Potes believes the technology platforms used in completing the two deals virtually will prove useful should ChoiceOne pursue future transactions.

“One thing that we learned is that you can do transactions virtually. So, I can see in the future, even when restrictions are lifted on social distancing, that these transactions and these conversions can be done more efficiently and be done virtually,” he said. “There’s always minor glitches here and there, but you’re going to have that whether it’s done virtually
or not. We didn’t feel we really lost anything by doing them virtually.”

After closing the two deals so close together, ChoiceOne remains interested in future acquisitions if the right opportunity arises. In the County Bank and Community Shores acquisitions, ChoiceOne staff who had yet to go through an acquisition — and were not with the bank when it merged in 2006 with the former Valley Ridge Bank in Kent City — learned how to manage a transaction. 

“It really just enhanced everyone’s skills and got everybody up to speed on doing transactions, and I think that will pay dividends in the future. If we have future transactions that come up, we have a playbook on how to do it,” Potes said. “We have an appetite to grow, but it has to financially make sense and it has to culturally make sense on anything that we would look at. As those opportunities become available, we’ll certainly take a look at them.”

Read 1015 times Last modified on Monday, 15 February 2021 09:16
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