PE Firms Raising Capital for Bank Bids but Few Deals of Late

Though executives at many private-equity firms continue to raise capital and scout opportunities, few have emerged victorious in the bidding for failed institutions in recent months. The reasons are many. The pace of failures has been slower than dealmakers expected. Methodical due diligence is slowing deals for banks that are still open, in which government loss-sharing is not available to protect buyers. And regulators remain reluctant to quickly sign off on deals that do not involve traditional bank buyers. "You're not going to see floodgates opening up soon in terms of a plethora of deals," said Mark Graf, an investment professional at Aquiline Capital Partners LLC, a New York private-equity firm. "The challenge is finding the right confluence of events with the right return on investment, and you have to meet the regulators' guidelines." The overall tone from private-equity executives appears calm despite an eagerness to put billions of dollars in capital to work. Most agree that as failures accelerate and traditional buyers prove scarce, private equity will be in the thick of things, ready to pursue an aggressive consolidation strategy. There have been notable deals, some point out, including one that closed last week where Aquiline bought common stock and convertible preferred shares that would give it a 24.9% of BNC Bancorp in High Point, N.C. BNC expects to use the funding for traditional and government-assisted acquisitions. Still, it took time for Aquiline to green-light its first direct U.S. bank investment. Graf, who will join BNC's board, has been with the private equity firm since late 2008 and former Wachovia Corp. CEO G. Kennedy Thompson came on board more than a year ago. Graf said, however, that Aquiline is looking at similar deals in other parts of the country.