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Bank advisers take long road to merger

Professional Bank Services Inc. and Austin Associates LLC only recently announced their merger, but the companies have been talking about a tie-up for years.

The two companies, which provide consulting and investment banking services mainly to bank clients, announced in January that they merged and that the combined company would take the name ProBank Austin. Professional Bank Chairman and CEO Christopher Hargrove said interactions between the companies date back to their earliest leaders.

According to Hargrove, a friendship existed between the late George Freibert, who founded Professional Bank in 1978, and Douglas Austin, who founded Austin Associates in 1969. "This was probably the longest courtship in history," Hargrove said.

Through the years, the companies became more familiar with each other and even referred business back and forth. Referrals were sometimes necessary because conflicts of interests could occur with the investment banking and consulting clients. For instance, if a consulting client were a logical buyer of a bank that Professional Bank was advising in a sale, the adviser would refer the consulting client to Austin.

The businesses became more intertwined about five years ago when Austin investment bankers registered with Professional Bank's broker/dealer subsidiary, Investment Bank Services Inc. Regulatory changes required the registration of M&A investment bankers, and instead of creating their own broker/dealer, the Austin i-bankers registered with Investment Bank Services, which was established in 1986.

Hargrove said he and the principals at Austin spoke about weekly for the last five years or so. At times, they would have strategic talks and discuss the proper time to execute a deal. Part of the reason Austin decided to move forward with the transaction is because the company wanted to ward off any potential succession issues that could arise in the future, said Craig Mancinotti, an Austin managing director and principal.

None of Austin's key leaders were on the brink of stepping down, according to Mancinotti, but the company wanted to make a move at least five years before anyone was going to retire. Companies that do not adequately plan can have nothing to sell when stakeholders do eventually leave, Mancinotti said.

"This is a preemptive strike," he added.

The leaders of Austin and Professional Bank believe the combination will allow each of them to provide a greater product suite to clients. Professional Bank's offerings include an education division along with consulting in the areas of compliance, safety and soundness, audit and management. Austin offers financial management services such as asset and liability and profitability analysis. Its consulting practice includes strategic planning, stock valuations, capital planning, stress testing and technology.

The combination also expands the footprint of each company. The Toledo, Ohio-based Austin had more of a Midwest focus with Illinois, Indiana, Michigan and Ohio as core states, while Florida, Indiana, Kentucky and Tennessee were the strongest states for the Louisville, Ky.-based Professional Bank.

"We often joke around about PBS being the SEC and Austin Associates being the Big Ten," Mancinotti said, referring to the college athletic conferences.

Before agreeing to the deal with Professional Bank, Austin did explore some other opportunities. Those discussions were mainly with accounting firms, Mancinotti said. Austin also exchanged ideas with investment banks, but those talks never got serious, he added.

Hargrove said he could not see his company's culture meshing well with a more traditional investment bank that offers trading and other businesses in addition to advisory. "This would not have worked with the stock boys," he said.

Culture clashes are not uncommon with mergers involving investment banks, and those clashes can lead to top revenue producers departing because they are not happy with the new arrangement. But the leaders of Professional Bank and Austin said they doubt they will experience clashes because their long pre-merger relationship helped each of them understand that the companies have similar cultures.

Professional Bank and Austin did not disclose the terms of the transaction, but Hargrove said it was an all-stock deal. "We are partners in this totally," he said.