Strong credit quality, a dwindling number of desirable targets, and the need to minimize takeover speculation on bank and thrift stocks are contributing to the increasing speed at which mergers are made in the financial services industry.
Star Banc Corp.'s $655 million pact to buy Great Financial Corp. of Louisville, Ky., was a case in point.
The deal, announced Monday, was struck in only three days of talks, said people close to the negotiations.
The two parties had held preliminary discussions in the past, but on Friday Great Financial said it wanted to speed up the process because heavy trading in its stock Thursday indicated word of the deal was starting to leak. The merger was hammered out over the weekend, approved by the companies' boards Sunday, and announced Monday.
Three days to make a deal may be a record, said some merger advisers. But they said transactions done in days are becoming more common as banks and thrifts gain experience at acquiring each other.
The biggest banking companies, such as NationsBank Corp. or First Union Corp., retain their own staffs to study potential targets. Even midsize and regional banks, like Cincinnati's Star Banc, now develop "wish lists," merger experts said.
Once a company is ready to sell, buyers usually have a good idea of what they are willing to pay.
"About the only time deals are held up anymore is when you are dealing with private companies and there is a family or other small group of shareholders to satisfy, or when you've got employee retention issues to resolve," said Edward J. Kelly 3d, co-head of the financial institutions group at J.P. Morgan & Co., which co-advised Barnett Banks Inc. in its recent sale to NationsBank.
"Otherwise," said Mr. Kelly, "in public companies, you've just got a single constituency,shareholders,and their interests are fairly obvious."
Negotiations in the Barnett deal-at $15.5 billion, the most expensive to date-took just over a week. Last year Mercantile Bancorp.'s acquisition of Roosevelt Financial Group Inc. was completed in four days.
Lee Meyerson, a partner at Simpson, Thacher & Bartlett, said the improved condition of most bank and thrift loan portfolios has helped make faster deals possible.
"People used to worry about the toxic waste hidden in credit files," he said. "In the early '90s, you'd have large teams of credit officers looking for just those things. But no one worries as much about that any more. Thrifts aren't making loans to build resorts, after all. Particularly in the Midwest, you're dealing pretty much with only plain-vanilla home mortgages."
In the case of Great Financial, the deal was done a little faster than either side had expected because of unusual trading activity in the Louisville thrift's stock. Last Thursday Great Financial shares soared $5.875, to $42.875, and volume was almost 16 times greater than normal.
That forced Great Financial and its investment banker, Sandler O'Neill & Partners, to step up the pace of talks with Star Banc, which was advised by Credit Suisse First Boston. Star Banc agreed to swap 0.949 of its shares per Great Financial share for 70% of the thrift and to pay $44 per share for the rest.
The leak "caused us to work some long nights," said Paul M. Baker, chairman and chief executive of Great Financial, "but I don't think it changed the deal any."
