MERGERS & ACQUISITIONS: Deal Spotlight Shifts a Bit in Less Active 1996

A year ago, as mergers were taking the industry by storm, Management Strategies joined the mania by naming 10 large banks that might be likely takeover candidates. Well, we're batting .300. Three banks on the list have been sold - BayBanks Inc., Integra Financial Corp., and Meridian Bancorp. A fourth, UJB Financial Corp., was involved in a big merger but as an acquirer. The other banks on the list - Barnett Banks Inc., Comerica Inc., Crestar Financial Corp., First Commerce Corp., Mercantile Bancorp., and Provident Bancorp - have remained independent. Overall, 1996 has been a lot quieter than the year prior in terms of mergers. The total value of bank mergers in the first quarter was $4 billion - half the value of the deals during the same period of 1995, according to SNL Securities. Analysts say several factors may be at work: The big banks that made deals need time to digest their acquisitions before coming back for more; many banks that were ready to sell have already done so; prices remain high; and many institutions are thinking twice before buying expensive and inefficient branch networks. Investors may also be more wary of deals based on unrealistic cost- cutting goals. However, said Joe Duwan, an analyst at Keefe, Bruyette & Woods Inc., "the pressures for consolidation will continue." His list of likely takeover targets now includes banks and thrifts in California, New England, and Missouri. Michael K. Diana, a Bear, Stearns & Co. analyst, said mergers would likely affect banks in Michigan (Comerica) and Missouri (Mercantile). He expects to see five big deals yet this year. "There is still lots of discussion going on," said Mr. Diana. "As soon as you see one deal, you'll see a lot."