M & A: how to put money in the bank; Fifth Third Bancorp CFO Mark Graf talks about the Ohio-based regional bank's highly successful merger strategy and the process it has in place to assure that the deals work.

• Author: Sweeney, Paul
• Position: Deals and dealmakers

Almost since its inception in 1858 as an obscure bank in the Ohio Valley, Fifth Third Bancorp has been a voracious acquirer.

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That urge to merge has transformed the Cincinnati-based financial institution into a huge multibank holding company with operations in eight states, mostly in the heartland. In covering a swath of territory from Tennessee to Illinois, plus Florida, the bank boasts $102.7 billion in assets and 1,092 full-service banking centers. Fifth Third, which came by it dowdy name in a 1908 merger, has engineered 90 acquisitions in the last 25 years alone, averaging close to four banks takeovers a year.

Now the 10th-largest banking company in the U.S., it's always on the prowl for new banks in new markets. "Fifth Third Bancorp," declares a recent research report by Friedman Billings Ramsey, a Washington, D.C.-area brokerage, "regards acquisitions as a key strategic tool to grow and enhance franchise value."

But such a strategy is not without risk. "If it becomes too aggressive and overpays for certain acquisitions," the FBR report notes, "or if it is unsuccessful in integrating transactions, earnings may be diluted."

At Fifth Third, Mark Graf, the senior vice president and CFO, is the person charged with seeing that takeover risks are minimized and that Fifth Third's strategy does not falter. As a direct report to the chief executive--West Point graduate and hard-charging Vietnam veteran George Schaefer--Graf remains a key figure in overseeing every takeover transaction.

"Generally, the CFO is the quarterback on the deal," says John Arfstrom, a bank analyst at RBC Dain Rauscher, a Minneapolis-based investment bank. "He sets the strategic vision. And he's in charge of hammering out the execution and the integration."

Fifth Third is renowned for its workaholic corporate culture. The bank combines a sales-obsessed but well-rewarded workforce with old-fashioned frugality. The culture is so distinct that Harvard Business School once used Fifth Third as a model for a case study on "hustle as business strategy." Over the years, numerous banks have sought to replicate its style, usually with little success. It is a formula, however, that works for Fifth Third: until 2004, its earnings growth had surpassed 10 percent for 22 consecutive years.

Much of that record was due to the company's adroitness at snapping up targets in key markets, swiftly incorporating new banks into the organization and infusing it with Fifth Third's sales-driven culture. Once they display the Fifth Third logo, newly acquired banks are soon off to the races--wooing new depositors, revving up loan growth, slashing overhead expenses and pushing the sales force to outperform each other with an array of cash, prizes, contests and other...