Halifax's bid for Birmingham Midshires has opened the floodgates for yet more windfalls.
Just when building societies began to think it was safe to go back into the water, carpetbagging sharks start to appear all over again. Thousands of would-be members, temporarily denied the right to join up, have taken advantage of the new relaxation in the rules to begin queueing round the block once more.

The irony of all this, after almost nine months in which building societies have quietly been winning back business from their demutualised rivals, is that it flows from events at one society that had already sold itself off last year.

Birmingham Midshires, which had been touting itself around the City for at least 12 months, finally found a buyer and agreed last summer to put a pounds 630m offer from Royal Bank of Scotland to its members. The deal would have given an average payout of pounds 630 per member. Then, earlier this month, Halifax stepped in to trump the agreed deal with a pounds 780m offer for Midshires, producing an extra pounds 150 per person.

The significance of this deal is the questions it raises about other societies, similar in size to Birmingham Midshires or barely smaller but equally highly regarded: if Halifax is so keen on this deal, what might the others be worth to another buyer?

Last year, five building societies demutualised. Those who shared in the bonanza have been amply rewarded. Alliance & Leicester gave each member 250 shares last April, with an initial trading price of 542p per share. They now sell for around 927p per share.

Bristol & West paid an average pounds 1,100 in cash to savers of two years' standing or more; Halifax's minimum share handout is now worth about pounds 1,850. Woolwich and Northern Rock followed with share handouts worth from pounds 1,900 to pounds 2,260.

Now Birmingham Midshires has re-opened the game many other societies are back in the frame. The question is: how to choose and how to join? If anything, things are easier now than they have been for months, as societies have relaxed their guard after last year's windfall fever.

But care is needed. First of all, windfalls are not guaranteed. Societies demutualising can choose whether to distribute cash or shares. The law prevents cash windfalls to members of less than two years. Bristol & West gave this group preference shares, whose price is more a function of interest rates than company performance.

There are no statutory rules on the qualifying period of membership for share windfalls. A society could backdate this to the first press speculation on demutualisation. Others have increased the minimum balance to qualify. Nationwide has gone one step further: membership can be secured by depositing just pounds 1 but new members are required to sign away windfall rights to charity.

However, some societies have reduced the minimum amounts needed to open membership accounts. Portman, the fifth largest, will accept just pounds 100 to open a savings account. Bradford & Bingley opened a record 700,000 new accounts last year and does not deny bagging "baggers".

Anyone seeking membership of the top 10 societies will need to invest a total of over pounds 10,000 into various savings accounts. This a hefty amount, so picking mutuals most likely to convert looks set to be the "baggers" new game.

Rob Thomas, banking analyst at Warburg's, has clear selection criteria. "Big mutuals don't have much of a future but smaller ones will survive as niche players. Management drives conversion. Societies used to have home-grown management teams, happy with the mutual ethos. But now they recruit from PLCs."

The chief executive of a society must get approval for conversion from board, Mr Thomas adds. "These are often composed of city types, who lose little sleep over giving up mutual status. Banks want to buy up building societies as a means of expansion. Finding an offer sufficient to tempt members with windfalls is not a problem."

If Mr Thomas is correct, Bradford & Bingley must be a front runner for conversion. Its chief executive David Rodriguez's last job was running Thomas Cook. He has already bought up specialist lender Mortgage Express and the estate agency chain Black Horse from Lloyds/TSB.

With plans to grow from assets of pounds 30bn over the next 10 years, this raises the prospect of non-mutual elements in the group generating most of its profits. However, its spokesman insists: "We are totally committed to mutual status". Few analysts are convinced.

Other conversion favourites include Britannia, big enough to survive as a non-mutual, and Portman, with results good enough to attract bids. Meanwhile, the Chelsea has just fended off "Members for Conversion", which sought to take demutualisation to a member's vote, by the simple expedient of closing the accounts of some 60 members who wanted a vote on deconversion.

Meanwhile, mutual life insurers are also coming under pressure to convert to PLC status. Norwich Union and the Australia's Colonial Mutual converted last year, with NPI and some of the smaller Scottish life offices tipped as future prospects.

According to Mr Thomas: "Smaller life offices can survive times of boom but will face difficulties if the economy slows down.... Start an endowment or buy one second hand to benefit from windfalls."


Top 10 Building Societies - minimum opening balance for new members

Nationwide: pounds 1 to open an account with member status, but windfalls go to charity.

Bradford & Bingley: pounds 1,000 instant access, pounds 500 for one-year bond, pounds 10 monthly savings plan, pounds 100 confers membership.

Britannia: pounds 5,000 instant access, pounds 2,000 five-year bond.

Yorkshire: pounds 2,000 Tessa, 90-day account, or branch account, pounds 3,000 postal account.

Portman: pounds 100 branch instant access, pounds 1,000 postal instant access, pounds 500 one-year bond.

Coventry: pounds 2,500 branch accounts and postal instant access.

Skipton: pounds 2,000 branch instant access, and pounds 5,000 for other accounts.

Leeds & Holbeck: pounds 1,000 branch account, pounds 2,000 postal account.

Chelsea: pounds 1,000 branch or postal account.

Derbyshire: pounds 1,000 in Derbyshire area, pounds 5,000 elsewhere.