Mary Ann Scully knew who to court as she negotiated to buy 1st Mariner Bank in Baltimore.
Scully, chairman and CEO of Howard Bancorp in Ellicott City, Md., initially reached out to one of 1st Mariner’s largest shareholders to express her interest in a deal. In addition to discussions with 1st Mariner’s management team, Scully eventually met with board representatives for each of the $975 million-asset bank’s three biggest investors while the parties were discussing a merger.
The efforts paid off. The $1.1 billion-asset Howard reached an agreement in August to buy 1st Mariner for $163.4 million in stock.
Scully’s initiative shows the benefits of schmoozing various players with ties to sellers, especially those with large financial stakes.
An investment group that included Priam Capital, Patriot Financial and Greenhill Capital bought 1st Mariner through a June 2014 bankruptcy sale. Each of those investors owns at least 16% of the bank, based on a regulatory filing tied to Howard’s proposed purchase of 1st Mariner.
Scully, leveraging an investment banking relationship, met with a representative for one of 1st Mariner’s biggest investors. During the Feb. 27 meeting, Scully asked about the bank’s near-term interest in a merger. The filing did not disclose the identity of the representative of the firm he or she represented.
The meeting paved the way for a dinner between Scully and Robert Kunisch Jr., who was 1st Mariner’s president at the time. Scully wasted no time making a pitch; the filing says she and Kunisch “had some high-level discussions regarding the long-term strategic advantages of a potential combination.”
Howard wasn’t the only potential suitor, though.
In early April, a publicly traded banking company contacted 1st Mariner. The parties began holding merger talks later that month. The other bank was not named.
Howard and 1st Mariner entered into a confidentiality agreement on May 11. Later that month, the banks’ representatives discussed the “organizational and locational aspects” of a potential merger, 1st Mariner’s history and business plan, and a potential budget and merger expenses.
By early June, 1st Mariner had preliminary indications of interest from Howard and the unnamed competitor. The board at 1st Mariner determined that it made sense to consider combinations with both suitors.
Kunisch succeeded Jack Steil as 1st Mariner’s CEO in early July. The bank announced at the time that Steil would remain its chairman.
Scully’s meeting with 1st Mariner’s biggest investors took place on July 10, when she met with Howard Feinglass at Priam, Michael High at Patriot and Boris Gutin at Greenhill to discuss “the strategic, financial and operational benefits of a potential combination,” the filing said. The meeting also covered corporate governance matters and potential business strategies.
Howard’s chances of landing 1st Mariner improved on July 17 when the other bank dropped out of the running. Two days later, Howard made its final offer.
The acquisition was announced on Aug. 15, ending a tumultuous decade at 1st Mariner. The bank lost $120 million from 2006 to 2015, and even warned at one point that it could fail. The company, under new management, reported a profit last year.
Howard said Scully will remain chairman and CEO, and Kunisch will become its president and join the board. Steil, who will also become a director, will serve as a senior business development adviser. Each executive has agreed to a one-year noncompete agreement that would start after they leave Howard, the recent filing disclosed.
The filing also noted that Kunisch had accepted a job offer with an initial term that would expire in March 2021. His initial salary will be roughly $375,000.
Kunisch, Steil and four other 1st Mariner executives are set to collectively receive nearly $1.1 million of “pre-closing success bonuses” tied to the merger. Kunisch and Steil would each receive nearly $187,000.