Sioux Falls, S.D.-based Meta Financial Group Inc.'s bid to acquire Troy, Mich.-based Crestmark Bancorp Inc. had two factors that were essential to the latter's board — an interest in growing Crestmark's lines of business and minimal employee layoffs.
However, the companies did not quickly agree on the deal's exchange ratio.
Crestmark's board, after discussions with financial adviser Sandler O'Neill & Partners, decided to look for potential merger partners. In July 2017, Sandler O'Neill reached out to nine potential acquirers. Five of these, including Meta, executed nondisclosure agreements with Crestmark. Only Meta and one other company expressed interest in acquiring Crestmark by Aug. 11, 2017.
On Aug. 25, 2017, Meta Financial sent a nonbinding letter of intent to acquire Crestmark in an all-stock deal for $190 per share to $205 per share, or $249 million to $270 million in aggregate. Based on Meta's closing price August 24, 2017, of $69.10 per share, the implied exchange ratio would have been between 2.75 and 2.97 Meta shares for each Crestmark share. Meta also expressed interest in growing Crestmark's lines of business and with minimal employee reductions, two features that the Crestmark board found important.
In September 2017, Crestmark indicated its interest in pursuing a deal with Meta but wanted to negotiate the fixed exchange ratio involved in the deal. On October 11, 2017, Meta proposed a fixed exchange ratio of 2.353, which Crestmark rejected. Sandler O'Neill suggested a fixed exchange ratio between 2.85 and 2.90.
Five days later, Meta increased its proposed exchange ratio to 2.65. This represents an implied purchase price of $212.27 per share and aggregate deal value around $279 million, based on Meta's Oct. 13, 2017, closing price. Following a board meeting, Crestmark approved the deal terms.
Discussions continued for the next couple of months, including the due diligence process and other deal terms. On Dec. 20, 2017, Meta completed its due diligence process.
On Jan. 9, the two companies executed the merger agreement. The deal was announced later that day, after markets closed. It was valued at $320.6 million, based on the buyer's Jan. 8 closing price.