Banks have moved steadily up the merger and acquisition advisory ranks, gaining market share as the total domestic M&A market has soared.
Six of the top 15 domestic M&A advisers this year are commercial banks. Last year at this time, only J.P. Morgan & Co. and Bankers Trust Corp. ranked among the top 15.
Many top-tier U.S. banks have invested in either building or buying into this line of work during the past 12 months. Based on the latest rankings, those banks that have bought securities firms with M&A specialists have gained the biggest share.
NationsBank Corp. and BankAmerica Corp. have surged ahead of longtime player J.P. Morgan this year. NationsBank bought Montgomery Securities, and BankAmerica bought Robertson Stephens & Co. Morgan, however, has built its M&A practice internally.
"While the commercial banks each have a different strategy, they are all migrating to the universal bank model," said Peter Morgan, the NationsBank managing director in charge of M&A strategic development.
"I think we make formidable competitors to straight investment banks because we tend to have a much broader relationship base as a commercial bank," said Mr. Morgan, who joined the Charlotte, N.C., banking company from Lehman Brothers two years ago.
Wall Street powerhouses like Goldman, Sachs & Co. and Merrill Lynch & Co. continue to dominate the M&A league tables. But some commercial banks are moving up handily.
NationsBank is the seventh-largest M&A adviser this year, capturing 8.6% of the market-the most of any commercial bank. BankAmerica ranked second among the banks, with 5.7% of the market, according to Securities Data Co.
On a pro-forma basis, a combined NationsBank-BankAmerica would vault ahead of many investment banks in the rankings. But that is not likely to happen because BankAmerica recently agreed to sell Robertson Stephens, the San Francisco investment bank it bought last October, to BankBoston Corp.
This could put BankBoston, which does not now rank among the top 25 domestic M&A advisers, on the M&A charts.
Banks that have acquired securities firms have done M&A advisory work that has been more than the sum of their two parts. Although Securities Data includes the acquired firm's work last year in the buyer's 1997 ranking-folding Robertson's M&A work in with BankAmerica's, for instance- that still would not have put BankAmerica among the top 25 advisers.
Likewise, NationsBank, which acquired San Francisco investment bank Montgomery Securities last year, still would not have made 1997's top-25 advisers list counting the work of both firms.
"I would expect an immediate pop after these mergers," said Scott Adelson, a managing director at Houlihan Lokey Howard & Zukin who runs the firm's unit Mergerstat, which compiles M&A statistics.
"If I'm a banker with NationsBank, for instance, once the Montgomery deal closes it will be about a nanosecond before I'm in my client's door with a Montgomery banker."
"The larger question is whether this will be sustainable," Mr. Adelson said.
Stewart Boswell, NationsBank's senior managing director in charge of M&A, said bankers who came from both sides of the merger have increased their focus on advisory work since October, when the Montgomery deal closed.
Mr. Boswell said NationsBank has completely restructured its approach to advisory work. Though he headed an M&A group at NationsBank before the merger, now the M&A investment bankers work directly with industry specialty groups, adopting Montgomery's old approach.
But though Mr. Adelson said Montgomery's M&A bankers may pick up more work through NationsBank's larger deal pipeline, he said he does not see commercial banks-whether or not they buy investment banks-challenging Wall Street on the really big deals.
"One thing the commercial banks have is an earlier relationship with clients," he said, "and they may pick up some more upper-middle-market-type of deals."
But size is key to the top M&A advisers as the valuation of individual domestic mergers skyrockets, Mr. Adelson said.
As a potent sign of the times, Kohlberg Kravis Roberts & Co.'s $29.5 billion purchase of RJR Nabisco in 1988-touted for years as the largest acquisition ever-was knocked out of the top 10 domestic M&A deals a couple of weeks ago with the announcement that Wells Fargo & Co. and Norwest Corp. would merge in a $34 billion transaction.
