JPMorgan Chase has won the bid to acquire First Republic, a troubled San Francisco lender, in a marathon bidding war managed by the Federal Deposit Insurance Corporation (FDIC). The US government announced the decision after 1 a.m. on Monday, capping off a weekend of back-to-back meetings and presentations by more than 800 JPMorgan employees from every business line. The bank's CFO even pulled an all-nighter. The competition ultimately came down to two heavyweights: JPMorgan and PNC, the nation's largest and sixth-largest banks, respectively. Both had survived the 2008 financial crisis by getting even bigger via a series of acquisitions.
JPMorgan convened a team of executives from various units, including investment banking, commercial banking, private banking, tax advisers, mortgage experts, asset and wealth management experts, and valuation specialists, to look at First Republic and report on what a deal would be worth to their particular unit. The bank submitted four new bids between noon and 9 p.m. on Sunday after the FDIC asked for additional parameters to conform the bids so that they could start comparing them. The final call came from the FDIC at roughly 1:15 a.m. on Monday, and First Republic was seized at roughly 2 a.m.
The pros of buying First Republic were that it would help restore stability to the banking system and lower the costs JPMorgan might have to pay to the FDIC if First Republic were to fail without a buyer in hand. The risks were many, too, including potential legal headaches, credit challenges, and the possibility that First Republic employees could weaken the franchise by leaving. The bidding war involved other major players in the industry, including Bank of America, US Bancorp, Citizens Bank, and Fifth Third Bancorp. In the end, JPMorgan emerged as the winner and is now tasked with the challenge of integrating First Republic into its business.
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