When a larger or diversified institution is failing, the FDIC may offer Alliance Bidding options. These options may appeal to bidders interested in only part of a failing institution.
The FDIC offers Alliance Bidding to facilitate the resolution of larger banks with dispersed footprints or multiple business lines. Alliance Bidding may be offered when:
- Multiple banks are interested in parts of a failing institution;
- There is little interest in purchasing the whole failing institution; or
- Institutions are not qualified to bid on the whole failing institution.
Alliance Bidding increases competition and helps smaller community banks and Minority Depository Institutions (MDIs) increase market share by allowing two or more bidders to submit a joint bid.
Alliance Bidding Process
When offering Alliance Bidding, the FDIC asks potential bidders if they wish to align with other bidders. Alliance bidders are required to sign confidentiality agreements, and authorize the FDIC to convey acquisition preferences (e.g. geographic area, assets, and liabilities) to alliance bidders that have agreed to the same disclosure terms.
Alliance bidders may submit bids both individually and as members of one or more alliances.
Alliance Agreement Structure
The parties of the alliance will designate one party as the lead acquirer responsible for executing the multiple transactions of the alliance agreement. The lead acquirer executes the following:
- The Purchase and Assumption Agreement (P&A) with the FDIC on behalf of the alliance.
- The agreements with each alliance member.
Though the FDIC is not a party to alliance agreements, each alliance member must obtain approval from its regulators and chartering authority.
Alliance Bidding Options
- Asset purchase: The lead acquirer forms alliances with other bidders to acquire loans by type or region. The bid often includes non-performing loans and other real estate. The assets, offered as optional pools, are marketed when the lead acquirer has no interest or is restricted from bidding on certain assets.
- Diversified operations: When the lead acquirer has no interest in particular markets, business lines or specialized lending operations of the failing institution, it can form alliances with other bidders. Alliance members can bid on segments of the failing institution such as deposits, branches, or mortgage operations of the failing institution.