United Community Financial Corp. CEO Gary Small contacted First Defiance Financial Corp. CEO Donald Hileman in early 2017 to assess his interest in engaging in an evaluation of a potential deal between the two Ohio-based companies.
But in September 2017, the companies decided to independently pursue their respective strategic objectives.
Throughout 2018, the First Defiance board continued to evaluate its business strategies, including possible M&A. The United Community board continued its regular strategic planning, including the evaluation of possible potential transactions.
At the end of the first quarter of 2019, due to the slower pace of acquisition opportunities and the pricing environment, First Defiance's board determined that the company and its management should focus on more significant merger opportunities with similarly sized institutions, including United Community.
In April, Hileman updated First Defiance's board on the results of his outreach in the first quarter. At that time, the board instructed Hileman to continue his discussions with other potential partners, including United Community.
In late April, Hileman called United Community's CEO inviting him to an informal meeting to discuss their organizations generally. The two executives later engaged in exploratory discussions about a potential deal that built upon their prior discussions and preliminary diligence from two years earlier.
In early June, Hileman and Small reached a preliminary understanding that if the parties were to combine, United Community's shareholders would own about 47% of the pro forma surviving company, which corresponded to an exchange ratio of roughly 0.3636 based upon the parties' relative common stock prices at the time.
Eventually, the United Community board instructed management and the company's financial adviser, Sandler O'Neill & Partners LP, to propose an exchange ratio of 0.3715, which would increase the pro forma ownership in the surviving entity of United Community shareholders to 47.5%. First Defiance ultimately agreed to this proposed exchange ratio.
First Defiance and United Community announced their proposed transaction Sept. 9.
