Case

Study:
MAB
(Madison
Avenue Bank) Bankshares, Inc.
Targets
Southern
Federal
Savings Bank of Bridgeton
Investment Banking Final
Presentation
Presented By:
M. Zeeshan Ibrahim
Samin Ghori
Sanaullah Munir
Samad Bawa
Zain A. Khan

Background of case
study
MAB Bankshares, Inc., a bank holding company with
two community banks
CEO Mark Pafford
Board of directors will not let MAB to be acquired

Southern Federal Savings Bank of Bridgeton (target

bank)
Strategically important (90 miles to west is Azalea)
Have done safe business in the past

MAB Bankshares, inc.

The holding company was formed in 1982
MAB Bankshares owned two banks in South Georgia
The Madison Avenue Bank in Azalea and the
Commercial & Agricultural Bank of Delphi
MAB focused on community banking by providing a
broad array of financial services to:
individual
Professional
commercial and agricultural customers

MAB MARKET AREA

DEMOGRAPHICS

Southern Federal Savings

Bank of Bridgeton
Southern Federal Savings Bank of Bridgeton
was chartered in 1938 as a federal mutual
savings and loan association (commonly
called a thrift institution)
It was converted into a federal stock savings
bank when it began issuing stock in 1994

Median Household income

statistics

 Every large and small

banks are merging to
remain viable needs to
acquire SFSB
Reduce cost structure and
increase revenue streams
Penetrate into new target
market

CONS

PROS

Why Acquiring SFSB?

Costly
Risk of jeopardizing profits.
Management perception
Both are privately held
Need to decide upon a
price through different
mechanism
Redundant people and
facilities to be handled in
what way?
Differentiation is another
issue one is bank and other
is thrift institution

Q. 1 Mark Pafford's reasons for

wanting to acquire SFSB

Maximize returns on investments

Be competitive in the industry
Mergers and acquisitions of large and small banks were
common
Believed that Southern Federal was financially strong
because it had done business safely over the years
Enter in a new market (growth)
MAB had to expand its presence to remain viable as a South
Georgia financial institution
Declining health of Southern Federal's president, therefore
Southern Federals Board were struggling to find an
acceptable replacement
Many of the MAB OLD Board members had retired and were
looking forward for growth opportunities

Q.2 Potential problems associated

with the acquisition of SFSB
MAB had moved its main office into a much larger banking facility
and Delphi Bank had also upgraded its facilities; thus MAB was
facing increased overhead with no sign of decline in the foreseeable
future
Acquisition will increase costs when MAB was already facing
challenges to become cost effective
Valuation of SFSB will be complicated
BODs were concerned of what the effects of the acquisition will be
on earnings
It will be difficult to settle down the philosophical differences
between a bank holding company (MAB) and a thrift institution
(SFSB)
Market value of SFSB would have to be determined as it was not
traded on an established market
Financing the deal was the most important and tricky part - Stock for

Q.3 Purchase price for SFSB

The purchase price for SFSB should be $14,626,000
Asset approach using a reasonable 3% deposit premium.
price/book value of 120.1 % which is close to the average
price/book values prevailing in the industry.

Income approach offers least price of $12,124,000

this will result in a very low price/book ratio of 99.6%, which
may result in losing the deal completely.

Market approach Is marked to market approach in which

they can buy the acquire bank assets on market value.

Q. 4 How Mark should recommend Board to

finance
the
acquisition?

He should consider the cash and stock for

stock approach as its an acquisition.
Seeing the cash availability in the financial
statements of MAB they can afford to give
some cash and stock for stock.

Q. 5 Consolidation method to be
used for the transaction and why?

Purchase method should be used as its not a joint

venture and it provides
Staff instructs supplier to provide those units that are
efficient in a given subject area
Staff is then allowed a certain amount of time to
examine those unit and select those that it will purchase
Unwanted items can be returned to the supplier
Acquisitions staff will provide the supplier with a profile
that will include all specifications & restrictions

 THANK YOU