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C. Other Factors

In addition to the bank-specific concerns for capital and the heightened focus on
tax and accounting issues, deal structure will be influenced by corporate and securities
law considerations common to all mergers and acquisitions. Alternative structures are
sometimes designed to address concerns about state law shareholder approval
requirements or to avoid class votes by certain classes of securityholders. While
triangular mergers often reduce the need to seek debtholder or other third-party
approvals, they may be considered to be cosmetically undesirable in certain
circumstances where a transaction is being framed as a merger of equals (although such
structures have been used in some prominent MOEs). Where a party to a transaction is
not a U.S. company, additional considerations may come into play that affect the choice
of structure and, in some cases, statutory share exchanges (in states in which such
transactions are authorized) or stock purchases have been used in lieu of, or in
combination with, a merger to address these issues. Exotic structures for cross-border
deals, such as dual-pillar arrangements and exchangeable shares, have been considered
from time to time and used by non-U.S. companies, including banking and insurance
companies, but so far remain untested or rarely used in the United States.

Where an acquiror has a need to reduce excess capital, cash consideration in a
deal is often part of the solution. Examples include the conversions of mutual savings
institutions into stock form, either into a fully-stock form or into a "mutual holding
company" structure, in which the depositor-members of the mutual savings institution
become members of a new mutual holding company, which holds a majority interest in
either the (now stock-form) bank or a stock-form, mid-tier holding company which, in
turn, owns 100 percent of the bank. In many cases, the mutual holding company structure
proves to be transitory and the institution undertakes a so-called "second step
conversion" into a fully-stock format. The mutual holding company is a creature of federal
banking law and regulations of the Office of Thrift Supervision (OTS) and, accordingly,
these companies are federally charted. Such conversions typically generate large
amounts of capital that cannot always be efficiently deployed by the institution in the
ordinary course of its business. Accordingly, an all-or part-cash acquisition is often
undertaken in connection with the conversion to reduce equity capital to more
reasonable levels. Past examples have included First Niagara’s acquisition of Bank of the
Finger Lakes, New Haven’s acquisition of two institutions simultaneous with a conversion
and Partners Trust Financial’s acquisition of BSB Bancorp in connection with its second-
step conversion. Thrift conversion transactions raise special regulatory issues, with prior
approval of the OTS usually being required before the transaction can be submitted to
shareholders, and they may take somewhat longer to complete than straightforward
bank mergers.

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