It never hurts to have a backup plan.

Bank Mutual in Brown Deer, Wis., was in the middle of negotiating a bank purchase that would have roughly doubled its assets when it started gauging interest from potential buyers, according to a recent securities filing tied to its agreement to sell itself to the $30 billion-asset Associated Banc-Corp.

The decision worked out for Bank Mutual. After the acquisition deal fell through, the $2.7 billion-asset Bank Mutual was able to swiftly complete a bid process that led to its July deal with Associated in Green Bay, Wis.

Bank Mutual’s approach to M&A highlights the benefits of keeping an open mind, as buyer and seller — or both at the same time. Management also negotiated the sale of five branches to Marine Credit Union during the same period.

Bank Mutual began pursuing the acquisition — officially called a merger of equals — with an unnamed institution last year, conducting due diligence in early February, the filing said. The same month a company representative reached out to 11 potential suitors. Three of the companies, including Associated, showed interest.

Bank Mutual and the MOE prospect spent several weeks in negotiations, but the potential deal fell through in mid-March when Bank Mutual was unwilling to offer an enticing price.

“Bank Mutual's management discontinued negotiations … given the disconnect between the parties as to pricing expectations,” the filing said.

By the end of March, Bank Mutual was holding talks with Associated and two other banks about a possible sale. One of the banks backed out of discussions in May.

Associated proposed an all-stock deal on June 26 that valued Bank Mutual at $10.27 a share. The offer was 3.6% higher than the first offer from the other institution, which would have paid 10% in cash. Each company was asked to provide a better offer by June 30.

The next time around, Associated’s offer of $10.63 a share was 2.3% higher than the other bank’s final bid. Bank Mutual’s board decided on July 5 to move forward with talks with Associated.

The filing also disclosed that Associated held informal meetings with regulators about the potential deal.

The companies quickly worked through the remaining details, announcing their $482 million deal on July 20. The agreement, which is expected to be completed in the first quarter, priced Bank Mutual at 160% of its tangible book value.

Associated expects the acquisition to be accretive to its 2019 earnings per share, excluding about $40 million of one-time charges. It should take about three and a half years to earn back tangible book value dilution of less than 1%.

The acquisition would be Associated's first bank deal since it bought First National Bank of Hudson in June 2007.

Associated plans to cut about 45% of Bank Mutual’s annual noninterest expenses. Half of Bank Mutual’s branches are within a mile of an Associated locations.

The filing provided more details on Associated’s consulting agreement with David Baumgarten, Bank Mutual’s president and CEO. Baumgarten will work under an employment agreement set to expire at the end of next year. He will be paid $350,000 over the course of the consulting period.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.