Merger offers investors an opportunity to share in the success of theBuffalo bank and bury Allfirst once and for all, writes Siobhán Creaton

AIB's senior management will be happy to have delivered what seems like a good deal for its shareholders.

The merger with M&T offers investors an opportunity to share in the success of the highly profitable Buffalo-based bank and to bury Allfirst once and for all.

But much will depend on what AIB has learned from its not-so-happy experience in Baltimore and whether it can strike a more harmonious and prosperous union with the upstate New Yorkers.

Mr Michael Buckley and the senior management team at AIB have taken a lot of flak this year.

The $691.2 million (€708.5 million) fraud at its small treasury operation in Baltimore dealt a severe blow to their credibility.

An investigation of how rogue trader, Mr John Rusnak, amassed losses of this magnitude over a five-year period without detection revealed poor management of its US business which, even before the fraud, had been a disappointment.

Yesterday, Mr Buckley said he had received the backing of the AIB board last September to look at fresh options to grow the business.

The following month it entered negotiations with M&T. The US bank treated the fraud as a "single event" and talks continued during the difficult months immediately afterwards, according to AIB.

Yesterday, much was made of the effort that went into finding a potential partner that shared a common set of values, ethos and culture as AIB and in ensuring that there was a genuine commitment from both parties to ensure a successful merger.

M&T chairman, president and chief executive, Mr Robert Wilmers, referred to Mr Buckley as "my friend, my new colleague" and both men spoke of the exciting opportunities ahead.

AIB shareholders are buying into an impressive bank. Since 1983, it has delivered compound annual growth of 25 per cent in cash earnings per share.

The compound annual rate of return to shareholders has been 24 per cent while M&T shares have shown the highest appreciation of any of the top 100 US banks.

The world's most successful investor, Mr Warren Buffett, believes in M&T's potential and his Berkshire Hathaway group holds 5.7 per cent of the bank's shares.

It has been an active bank in terms of acquiring new businesses, completing 10 mergers and acquisitions in the past 11 years and it will bring much experience to integrating Allfirst into its existing operations.

Mr Buckley is insistent that what has been agreed is a long-term relationship and that there are no inbuilt conditions that could force AIB to exit the arrangement in the future.

A structure has also been agreed that will give Mr Buckley and Mr Eugene Sheehy, the AIB executive currently running Allfirst, access to the highest executive levels within M&T.

Two non-executives will be appointed to the board of directors and will sit on key committees, including the audit committee.

AIB's board will also benefit from Mr Wilmers' considerable experience. The stock market has responded positively to the deal.

Some analysts remain to be convinced about the longevity of the arrangement with some focusing on the potential it offers for AIB ultimately to exit the US market.

Others said it had restored their faith in Mr Buckley and his management team.

On paper it is a shrewd move. It is now up to the board of directors to ensure that senior management pay closer attention to M&T than they did to Allfirst.

The investigation of the $691.2 million fraud showed that AIB's "light hand" approach to managing Allfirst was a disaster. Documents filed with the US Securities and Exchange Commission reported a poor attendance by its executives at board meetings.

We now know that relations between the boards of AIB and Allfirst had been strained for many years, leading to the breakdown in communications that contributed to the massive fraud.

AIB shareholders can now rely on the experience of Mr Wilmers and his team to drive their investment in the US foreward.

Only time will tell whether the next phase of AIB's foray in the United States will be a winner for them.