Mike Daniels, the CEO and chairman of Nicolet Bankshares, is no stranger to the M&A game. The $15.6 billion bank based in Green Bay, Wisconsin, most recently closed its acquisition of MidWestOne Financial Group in Iowa City, Iowa, taking it past the $10 billion threshold in February.
“We’ve done 10, 11 deals,” Daniels told Sal Inserra, senior advisor at Bank Director, in a recent webinar. The bank has seasoned staff equipped to handle due diligence. Many institutions lack that experience but may be interested in buying or selling given the improved environment for dealmaking. He advised directors to go in with a clear understanding of their strategy. “Do you all agree on what you’re doing and why you’re doing it, and what you want the outcome to be?” he said.
In this conversation, Daniels shares Nicolet’s M&A philosophy, its approach to integration and how he felt about crossing $10 billion, a regulatory barrier that caps interchange fees and brings with it additional regulatory scrutiny, including the Consumer Financial Protection Bureau as a regulator. The transcript below has been edited for brevity, clarity and flow.
BD: I was told early in my career that M&A is more than the numbers. What’s your thought process like?
Daniels: Early on, it was about scale and getting to having that currency. Now it’s about, “Are we a better company after we do it?” To get big for big’s sake is just work. I’m not interested in doing a lot of work just to get big.
It takes two parties that want to have a conversation about what the consideration should be and what they’re trying to accomplish together. Is there alignment? Is there overlap? Do they at least believe the same thing? All the math in the world can’t get you there if you’re combining apples and oranges.
BD: What kind of teams should a bank have in place to integrate?
Daniels: We don’t have people sitting around waiting to do a deal. We have project managers that manage a variety of projects; those projects may get pushed to the side when we’re doing an integration. You’ve got to have a team that understands what you’re trying to do.
BD: When integrating the rank-and-file, how is that training done?
Daniels: It’s constant training. “This is who we are, this is what we’re going to do together.”
Everyone has a buddy in a like-position, and then there are also people on site. We will take somebody from an existing office and short staff our offices and go put them on site in every branch to help with that. It could be one of the tellers, personal bankers, whomever.
We have about 900 legacy Nicolet employees, another 700 or so at MidWestOne — 1,600 people roughly. We’ll probably have, on conversion weekend, 150 Nicolet people at legacy MidWestOne offices helping after that conversion, people coming in on the weekend logging in the systems, tellers running batches, making sure the transactions are working, making sure they’re all logged into the system, all ready to go Monday morning to have as minimal of customer disruption as you can.
BD: When you start working on this process, are you looking at it with open eyes saying, “I may find something on their side that I want to implement?”
Daniels: If somebody’s doing something better or more interesting than we’re doing, let’s adopt it.
We’re efficient, our processes are good, but that doesn’t mean they can’t be improved and can’t be perfect. And I expect all our people to have enough humility to say, “If there’s a better way to do it, let’s find it.”
BD: As you were approaching $10 billion, how did the consideration of interchange fees impact that decision?
Daniels: We’ve been getting asked for the last couple of years, when we were about $8.5 billion, “What are you going to do to cross? Are you going to wait and go over organically? Are you going to do a small deal? Are you going to do a big deal?”
The analysis we did was twofold. We said, “Michigan, Wisconsin, Minnesota and Iowa. What are the banks, whether they’re actionable or not, that would be worth crossing $10 billion? And what would make us better?”
We have the ability internally to run models on these. Then we started having conversations saying, “This one’s unactionable for these reasons, this one’s actionable for these reasons.” [The loss of interchange income when we hit $10 billion is] about a $7 million hit for us.
There’s no right or wrong answer. It’s what are you trying to accomplish at the end of the day, and is my company better as a result?
We were able to answer that question in the MidWestOne transaction — great deposit base, feels a lot like Wisconsin, especially across Iowa. Minnesota is an attractive market. You look at the dots on the map, and it lined up well, and the economics of it lined up well. But more importantly, Midwest nice is a real thing. They mattered in the market. They talk about community. They talk about where they live. It sounded like us, and it felt very good.
