Back in 1991, when NationsBank Corp. bought C&S Sovran Corp. in one of the largest banking deals of its day, no fewer than four Wall Street investment banks advised the growing Charlotte, N.C., superregional.
But when NationsBank said 10 days ago it would buy Boatmen's Bancshares in the nation's third-largest bank merger ever - at a 41% premium - no investment bankers were on board as advisers.
Perhaps more important than advising, investment bankers could have pitched the benefits of the nearly $10 billion deal to skeptical investors.
Since the Aug. 30 announcement, NationsBank's stock price has swooned 9.6%, shaving $2.5 billion off its market capitalization and nearly $1 billion off the deal's value.
Some say NationsBank may have made a critical mistake in not hiring an investment banker.
While the company did use Little Rock-based Stephens Inc. to write a fairness opinion, no high-powered New York firms were lined up to defend the deal in the wake of criticisms that NationsBank had overpaid.
"They have different rolodexes in New York than in Arkansas," said Scott Edgar, an investor at Sife Trust Fund. "You really need to have someone with investor contacts making those phone calls and saying this deal is not as bad as you might think."
"All the major bank mergers have used investment bankers," he added, "so I thought it was unusual NationsBank did not use one."
Contributing to NationsBank's difficulties is the complicated shareholder return formula, known as economic value added, that it is using to defend the deal, said Merrill Ross, an industry analyst at Wheat First Butcher Singer Inc.
Created by Stern Stewart, a New York consulting firm, economic value added is not an especially well-known concept on Wall Street, the analyst said. That makes investor understanding of the Boatmen's transaction even more problematical.
Wells Fargo & Co. faced a similar problem last year when it launched a hostile offer for California rival First Interstate Bancorp. That deal was uncommon in banking in two respects: It was aggressive, and it was based on the rarely used purchase accounting method - as is the NationsBank deal.
But unlike NationsBank, the San Francisco banking company relied heavily on investment banks. It hired CS First Boston Corp. and Montgomery Securities, paying them $10 million each in a decision that surely helped win First Interstate early this year.
One investment banker said that a big reason Wells hired the two firms was to tap their institutional investor client contacts.
"Part of Wells' apparent strategy was to hire Tom Hanley (then of CS First Boston) and Dick Fredericks (of Montgomery) to ease institutional investors' minds," said Tod Perkins, a vice president at UBS Securities, where Mr. Hanley now works.
Mr. Hanley and Mr. Fredericks have enjoyed long, successful careers as banking industry analysts and are especially well-known among bankers for their relationships with investors.
From Day One of Wells' hostile offer, its investment bankers were in touch with investors - and the media - explaining the complicated deal.
Unlike many on Wall Street, Mr. Perkins lauds the Boatmen's deal, but he also says NationsBank's interests might have been better served with an investment banker on its side.
For its part, NationsBank maintains that its stock price should rise as investors become better acquainted with the deal.
"Obviously, we wouldn't have done this if we didn't believe this was a good deal for investors on both sides, both for Boatmen's and for NationsBank in the long term," a company spokesman said.
"We think that we told the story on our own behalf very well and that the market will confirm our judgment in the long run," he continued. "Obviously, the stock fell over the past couple of days, but that is short term. In the long run we believe that this merger is going to be best for everybody concerned."
With many major deals under its belt, NationsBank ranks as such a sophisticated acquirer that it really does not need Wall Street advice on the deal's impact, said John P.C. Duncan, a lawyer at Jones Day Reavis & Pogue.
And with a large investment banking unit of its own these days, Mr. Duncan added, NationsBank already has many and varied institutional investor contacts.
But an investment banker countered: Why not hedge some of the risk in a multibillion-dollar deal by hiring a well-known Wall Street name for $10 million?
"It is always useful if you are having knee surgery to have one of the best knee surgeons standing by even if the local orthopedist will do the operation," said the investment banker, who requested anonymity.
Other industry observers pointed out, however, that NationsBank has long been the target of grumbling on Wall Street, fairly or not, for its acquisition strategy. Indeed, the bank was peppered when it made a hostile offer for Citizens and Southern Corp., one of C&S/Sovran Corp.'s predecessor companies.
When NationsBank, then known as NCNB Corp., finally did buy C&S/Sovran, it hired the four investment banks - paying them a total of $22 million - to keep them from working with other companies that might also have wanted to buy C&S, an investment banker said.
Today, NationsBank's actions in that deal are praised by nearly everyone as brilliant. Time will tell whether the same can be said of its handling of the Boatmen's deal, but certainly no investment banks are making that case.
Bridge News was formerly Knight-Ridder Financial News.