Bankmail

What is Bankmail?

Bankmail is a bank's promise that it will finance a company's takeover bid and not help the other bidders.

How Does Bankmail Work?

Let's say Company XYZ wants to buy Company ABC. Three other companies are also interested in purchasing Company ABC.

Company XYZ wants to borrow most of the money for the acquisition offer. It goes to Bank DEF for the money, but it engages in bankmail. That is, it negotiates a deal in which Bank DEF, which is the largest in the country, will lend Company XYZ the money for the deal and that it will not lend money to the other three companies for the deal.

In this way, Company XYZ effectively shuts off a source of capital to the other bidders.

Why Does Bankmail Matter?

Bankmail can give bidders a potential advantage in winning deals, because if they can prove funding from a large, reputable bank that other bidders can't use, the sellers may feel more secure that the deal will get done and funded. Additionally, locking up Bank DEF (in our example) might mean that the other three bidders will have to secure funds from other banks at higher costs.