Pine Brook Sees Bank Deal Opportunity

Dan Wilchins and Megan Davies
Wed Mar 3, 2010

NEW YORK (Reuters) - Private equity firm Pine Brook Road Partners sees opportunities to buy a stake in one or more banks as a platform to acquire additional lenders, potentially through assisted deals from the Federal Deposit Insurance Corp.

Pine Brook sees opportunities in lending now, with so many banks struggling to repair their balance sheets, said William Spiegel, a co-founder of the New York-based firm.

Many of the specialty finance companies, which unlike banks, don't take retail deposits, are struggling to finance themselves.

It might make sense to acquire a stake in a bank and use that as a platform for taking over other banks, Spiegel said at the Reuters Private Equity and Hedge Funds Summit in New York..

Pine Brook would be open to investing with other private equity firms. Current rules prohibit private equity owning more than 24.9 percent of a bank, unless they convert to a bank holding company.

"We see an opportunity to create $2-3 billion banks by cobbling together a series of smaller banks; that's a very patient strategy," Spiegel said.

There are several geographic areas that Pine Brook is focusing on for banks, including the Pacific Northwest, the Southeast, and California.

"We are focusing on where the long-term demographics are good," Spiegel said.

"That would be the Pacific Northwest, California, Texas, the Southeast. Those are good places to be," he added. Places with high population density, such as New York and the broader Northeast, might also be interesting, he added.

Spiegel said he'd ideally identify an existing bank that's "relatively clean," with a strong management team to back.

"We'd like, if we can, to start with a core bank that's clean and healthy as the basis from which to participate in FDIC assisted deals."

Acquisitions could also include healthy banks. He's predicting a vast consolidation in banks, but said it would be specific to certain regions.

Pine Brook invests mainly in the energy and financial services sectors, and often offers equity to startup companies.

If a company in its portfolio is performing well, it can add capital over time, and its holding periods can be at the maximum 12 years, longer than most other private equity firms.