Sanford I. Weill, one of the financial services industry's premier dealmakers, predicted Tuesday that $100 billion merger prices are not far off.
The chairman of Travelers Group, who has assembled one of the biggest and most diversified financial companies largely through acquisition, thus suggested that no end is in sight to the merger momentum.
His remark, to a New York State Bankers Association meeting, was similar to one last November by Philip J. Purcell, chairman of Morgan Stanley, Dean Witter & Co. Mr. Purcell said, "We are to go from $20 billion deals to $100 billion deals" as companies bulk up to remain competitive.
"Size is important if you want to be a global player," said Mr. Weill, reciting the "bigness" mantra in a panel discussion that included Thomas G. Labrecque, president of Chase Manhattan Corp., and Maurice R. "Hank" Greenberg, chairman and chief executive officer of American International Group.
Travelers Group last year acquired Salomon Brothers in a $9 billion acquisition that helped boost its assets to $350 billion. Among commercial banking companies, only Chase is larger, at $366 billion of assets.
The biggest banking industry price tag to date was the approximately $17 billion that First Union Corp. agreed to pay for CoreStates Financial Corp. last November.
"Consolidation has been an important force in helping to reengineer the industry," said James J. McDermott Jr., president of Keefe, Bruyette & Woods Inc. "But there are many who have grown skeptical" of the success of some of the deals, he added.
Mergers on the scale of those predicted by Mr. Weill, who implied they are perhaps a few years off, are not beyond the realm of possibility, analysts said.
But there are dissenters who say profitability and competitiveness depend more on execution than on sheer size.
Last week, Frank N. Newman, chairman and chief executive officer of Bankers Trust New York Corp., told an audience of Wall Street analysts that "the most successful businesses are not necessarily the biggest and the most vertically integrated."
Thomas Brown, an analyst with Donaldson, Lufkin & Jenrette Securities who has long been critical of some of the bigger bank mergers, insisted that "size is not a critical variable for success."
Also speaking at Tuesday's meeting in New York, Mr. Brown urged bankers "not to accept that conventional wisdom."
Mr. Weill, Mr. Labrecque, and Mr. Greenberg generally agreed that bigness creates the scale and economic clout needed to survive in the global marketplace.
Size allows companies to spread their risks, Mr. Weill said, so that "when a problem happens, it's just a pinprick rather than an explosion."
And a corporation with scale can make more and larger investments in technology. "Companies will have to grow to afford" those expenses, he added.
Mr. Greenberg, however, warned that bulking up for its own sake could create culture and execution problems, particularly as banks or other companies seek to expand their product offerings by making acquisitions across industry lines.
"We know the insurance business and we try to stick with what we know best," Mr. Greenberg said of AIG. "We have a unique culture that we would not want to dilute."
"You have to decide who you want to serve," Mr. Labrecque said. "Once you have decided who you want to be, you have to have the products, the market share, the scale, the technology, and the human resources" to support it.
George W. Hamlin 4th, president and chief executive officer of $400 million-asset Canandaigua National Corp., sounded the sole note for the little guy during the panel discussion: "Smallness is a virtue too," he said.
