Commercial Due Diligence Report
SunTrust Bank and BB&T Merge
Transaction Overview:
BB&T is the buyer, 57% ownership (shareholders base). BB&T bought SunTrust Banks for $28.24 billion in an all-
stock deal. They called the merger of equals, value at $66 billion. The combined company will be the sixth-largest
U.S. bank based on assets and deposits. Top four banks total 2 trillion, so still have a big distance away from the
very top four elite, but they will in better shape to compete and serve customers.
The intention of M&A:
Both two companies want to achieve a synergy effect. Someone asked CEO of BB&T that why is now the right time
and how did this comes to fruition given of course that both of two bank certainly have seen a very strong path
ahead for both your companies as an independent. Kelly King said they both focused on organic growth proposal
frankly that is the best way for any company to grow itself from a quality and profitability, but at the same time,
from an industry perspective about the changes in the banking industry and the tremendous increase in the need
for technology investment to be able to provide the level of digital capabilities that their client demand. BB&T and
SunTrust are all facing an increasing set of complex economic realities where they have to invest more and more in
technology so they both recognize that to go forward with the best premier financial institution they needed a
digital scale that they can make the technology investment necessary to provide the very best digital platform and
other tech support. Cost save give run for investing for the future, they said 12.5% cost savings 1.6 billion roughly
was not about the cost saves it’s about what can we invest in creating the capacity to continually invest in their
company.
CEO of BB&T Kelly King said, “T to the 3rd power is touch, technology resulting in trust, we will double down on
technology and the integration of the touch and technology meets the clients where they want us to meet them
with the best service quality delivery.”
Employee lay off:
For both the merge and acquisition, everyone will be struggled with where they go. Kelly King and Bill Rogers said
they will take care of client-facing associates and if they are doing a good job, then their job will be assured. The
reason is when clients come, they do not care about mergers, all they care about is if the associate is “safe” and
they can move on. Also, they said they will take care of all the employees to make sure they all succeed and happy.
Recent environment and trend for retail banking:
Retail banking is getting much difficult, the additional digital investment that is required, that is why they need to
combine to make not just investment to follow but to lead. They said they will be focusing on innovation and
Technology Center as it is about not looking backward but looking forward. Their goal is not to make the needs of
their clients but to exceed the needs of their clients.
Unique point: (Already full of experience and fully prepared/ Similar background and good relationship)
Both CEO Kelly King and Bill Rogers have some experience with the Merger. Kelly King said he did a very successful
merge of equals in 1995 which is a very important level of experience, he stated that SunTrust and BB&T have the
same kind of mission, the same kind of purpose and they are focused on helping our communities, clients, and
associates. Kelly King and Bill Rogers felt very confident about this merge as they already built, the executive team
and second level of senior leadership.
After Merge, they said they will get along, they already know each other for a long time, both are North Carolina
boys and mostly they all have a deep passion for their people. “we are doing fine but working together we could
do even better” said Kelly King.
Commercial Due Diligence Report
SunTrust Bank and BB&T Merge
Buyer: BB&T
Seller: SunTrust Bank
Industry/Market:
- Current Market ranking is 15th, Banking industry is large. (After merge will achieve
nation’s 6th largest bank with $441.2 billion is assets)
- The market is growing extremely fast because of the technology growth – Commercial
Banking in the US annualized market size grow with 3.8% on average between 2015-
2020.
- Banking industry trends is the shift to digital, specifically mobile, and online banking.
This digital transformation has led to increased competition from tech start-ups, as well
as consolidation of smaller banks.
Customers:
- BB&T offers banking service to both retail and commercial clients to help reach the
financial goals. (ex. Asset management, Insurance, Home equity lending, Corporate
banking.)
- Customers now expect interactions to be simple, intuitive, and seamlessly connected
across physical and digital touch points. Customers want options for how they bank,
want to be understood and want responsible customer service.
- Customers are becoming more willing to pay to use their banks’ mobile apps.
- High frequency of repeat businesses
Competition:
- Competitor: Chase is BB&T top competitor. Chase generates $66B more revenue than
BB&T.
(Strengths: JPMorgan Chase is the largest bank in the US, it has presence in over 100
markets.
Weakness: Several controversies have affected JPMorgan chase. It suffered from a
technical glitch in Feb 2018. Also, the over-dependence on the US market.
Opportunities: JPMorgan Chase offers its customers different types of credit cards.
Credit card use is on the rise around the world. Also, expansion of the bank’s geographic
reach is also worth exploring.
Threats: It faces threats from several competitors, such as Bank of America, Wells Fargo,
Citigroup, Goldman Sachs.)
- SWOT analysis for BB&T
Commercial Due Diligence Report
- Several Competitors: Bank of America Corporation, Regions Financial Corporation, Wells
Fargo, Citigroup, Goldman Sachs.
Company:
- General Business Development: BB&T has maintained a long-term focus on a strategy
that includes expansion of asset size and diversification in terms of revenues and
sources of profitability. This strategy encompasses both organic growth and acquisitions
of complementary banks and financial businesses.
Commercial Due Diligence Report
- Key challenges: 1. Consolidation and competition in the financial service industry may
impact deposit market share. 2. Many competitors. 3. Technology improvement.
- M&A strategy: BB&T’s growth in business, profitability and market share has historically
been enhanced by strategic mergers and acquisitions. Management intends to remain
disciplined and focused about future merger and acquisition opportunities. BB&T will
continue to assess bank and thrift acquisitions subject to market conditions, primarily
within or contiguous to BB&T’s existing footprint, and will pursue economically
advantageous acquisitions of insurance agencies, specialized lending businesses, and fee
income generating financial services businesses. BB&T’s strategy is currently focused on
meeting the following three acquisition criteria:
· Must be strategically attractive – meaning that any bank acquisition should be in BB&T’s
existing footprint to allow for cost savings and economies of scale or in contiguous states
to provide market diversification, or the transaction must be otherwise strategically
compelling;
· Any risk-related issues would need to be quantified and addressed
· The transaction must meet BB&T’s financial criteria.
- The Target Brand SunTrust Bank considered very strong in the market who owns
$31.141 market cap.
- SunTrust and BB&T are in the same industry, both want to achieve a synergy effect.
They ranked 15th and 16th in US bank separately.
