NEW YORK ( TheStreet) -- M&T Bank ( MTB) may have a "Plan B" in mind after merger talks with Banco Santander ( STD) broke down again.

Management or large bank investors may pursue a stake buyback from Allied Irish Banks ( AIB) in order to maintain its independence, says one analyst.

Collyn Gilbert of Stifel Nicolaus believes that a number of M&T shareholders -- including Warren Buffett -- are likely to bid for Allied Irish's 22.5% stake in order to increase their holdings in the U.S. bank.

Alternatively, M&T management may be able to buyback the stake itself. "It would require M&T raising capital to do so, but M&T could also handpick some of their 10 largest shareholders to buy that stake too," Gilbert explained.

The Irish lender is being forced to sell the stake in order to raise 7.4 billion euro to meet new government capital demands by the end of the year. Santander was believed to have been the lead bidder for the stake, which is rumored to be worth around $1.6 billion, according to a Reuters report.

Other bidders could include Canadian bank Toronto Dominion ( TD - Get Report), PNC Financial Services Group ( PNC) and M&T shareholder Warren Buffett.

Over the weekend talks reportedly fizzled out over a disagreement about who would control the combination of Santander's Sovereign Bank unit and Buffalo, New York-based M&T, according to an article from the Wall Street Journal.

"M&T runs phenomenal operations. Why would they subject themselves to a challenge or hurdle like Sovereign Bank? They are negotiating in a position of strength," says Gilbert. "They also have to be mindful of diluting shareholders."

"AIB has been a good partner for M&T because they haven't meddled with the company," said David George, a research analyst at Robert W. Baird. "The catalyst for this really revolves around Allied Irish Bank. They have to sell that stake by the end of the year."

--Written by Maria Woehr in New York.

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