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issues, such as affiliate transaction restrictions under Sections 23A and 23B of the Federal
Reserve Act, the need for cooperation between the two bank holding companies in future
acquisition applications, and the need for both holding companies, as a practical matter,
to satisfy heightened managerial, capital and CRA standards should one wish to become
a financial holding company.

From the perspective of an acquiror bank holding company in which the seller will
have a major stake, if the seller has insured depository subsidiaries outside of the
acquiror’s bank subsidiaries (or might acquire them in the future), consideration also
needs to be given to potential liability of the acquiror’s subsidiary banks under the cross-
guarantee provisions of the Financial Institutions Reform Recovery and Enforcement Act
of 1989 (FIRREA).

Structural considerations can also affect which state and federal regulatory
approvals will be required. For instance, in the AIB/M&T transaction described above,
separate Federal Reserve approvals were needed both for M&T’s acquisition of Allfirst
and for AlB’s acquisition of a substantial stake in M&T (in addition to applicable state
regulatory requirements). Where the target company is a unitary bank holding company,
it is often possible to avoid Federal Reserve review (and sometimes state regulatory
review) by structuring the transaction as a simultaneous merger of the holding companies
and the banks (thus bringing the transaction within the coverage of the Bank Merger Act).
Following the Gramm-Leach-Bliley Act, banks are increasingly making Hart-Scott-Rodino
Act filings with respect to some or all of the nonbank portion of acquisitions, and the
choice of structure can have an effect on the identity of the filing parties and the
information required to be obtained for the filings.

The mirror image of the unusual situation in which the seller becomes a
substantial shareholder of the acquiror is the situation, also quite rare in U.S. financial
institution M&A, in which the acquiror acquires a majority, but less than 100 percent,
interest in the target. Such was the case in Toronto Dominion’s acquisition of Banknorth,
announced in 2004. In that case, citing the desire to preserve capital, Toronto Dominion
agreed to acquire 51 percent of Banknorth. Banknorth shareholders received a package
of consideration consisting of Toronto Dominion common shares, cash and a share of the
49 percent of Banknorth common equity that remained outstanding after closing (in April
2007 Toronto Dominion purchased the remaining outstanding shares in TD Banknorth).
The rationale of the transaction was that, with a publicly traded equity currency, capital
support from Toronto Dominion and a management experienced in acquisitions
remaining in place, Banknorth would be the vehicle to speed Toronto Dominion’s
expansion into the United States and Toronto Dominion would permit Banknorth to
expand its historical acquisition strategy. Another example is the 2006 merger of Merrill
Lynch Investment Managers and BlackRock, as a result of which Merrill Lynch held a 49.8
percent economic and 45 percent voting interest in BlackRock (which was itself to be

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