Not all bank mergers are fueled by visions of manifest destiny.
That's one message in Fleet Financial Group's proposed $16 billion acquisition of BankBoston Corp.
In contrast to the string of market-expanding, regulation-pushing megadeals that dominated last year, this one returns to basic merger disciplines: consolidating market share and cutting costs.
The Fleet-BankBoston deal "is a noncontroversial transaction," said Lawrence W. Cohn of Ryan, Beck & Co. in Livingston, N.J. "Nobody broke new ground." He called it "a classic in-market transaction."
The agreement is a reminder that the market has banking companies on a tighter leash, will not tolerate stumbles, and is particularly nervous about exposure to volatile overseas markets.
BankBoston, with its sturdy New England business, profitable Latin American business operations, and visionary management, had for many years been a contender among banking heavyweights.
But when Brazil's economy went into a tailspin last year, so did BankBoston's stock price. Though BankBoston shares have recently crept closer to their high, Fleet pounced at the sign of weakness.
To be sure, observers saw clear benefits in the transaction. "Businesses that BankBoston is strong in, Fleet is not strong, so the combined company is very strong across a much broader product mix than either company would be standing alone," said Mr. Cohn.
But gone was the exuberance that accompanied the creation of Citigroup, the new BankAmerica, and the new Wells Fargo & Co.
"This is a big deal, and it's hard to say how many deals like this will follow," said bank analyst Anthony Polini of Advest Group. "But I don't think that we will get the excitement that we had last year."
The Fleet-BankBoston transaction has more in common with the opportunistic deals of 1992 to 1995-all of which came after the target's business operations had suffered some financial blow. Among them: Chemical Banking Corp.'s takeover of Manufacturers Hanover Corp., Wells Fargo's purchase of First Interstate Corp., First Chicago's deal for NBD Bancorp, and BankAmerica's acquisition of Security Pacific Corp.
What helped usher in this deal were changes in bank fundamentals, said Mr. Polini. "Robertson Stephens, BankBoston's recently acquired investment bank, did not prove to be a winner out of the gate, and their high-yield bond desk also generated some disappointing results," he said.
"Brazil's and Argentina's problems also hurt the company's stock price, making BankBoston more vulnerable than it was in the past," said Mr. Polini.
By contrast, last year's mergers combined companies that were outside their region, where there was little overlap and where creating a geographic footprint was the leading theme, said Charles M. Nathan, a merger and acquisition specialist with Fried, Frank Harris, Shriver & Jacobson, New York.
NationsBank stepped out of its predominantly Southeastern region when it merged with BankAmerica Corp., which has strong West coast presence. And Travelers Group's deal with Citicorp created a company with an unprecedented menu of financial services.
The similarity of the Fleet-BankBoston deal to those in the more distant past has raised skepticism among investors. Many noted the spotty track record among banks that targeted weaker companies.
Wells Fargo's difficulty integrating First Interstate ultimately pushed Wells into a deal with Norwest Corp. And BankAmerica had trouble sorting out credit problems after its deals with Security Pacific and Continental Bank Corp.
Still, not all in-market mergers have brought a legacy of woes or hampered the progress of the freshly combined company. Chase's in market acquisition of Chemical Bank progressed with relatively few problems.
"Fleet and BankBoston know each other very well and Fleet will be able to get cost savings out more quickly," said Eugene O'Kelly, vice chairman of financial services at KPMG. "By doing this deal Fleet has put itself into the (consolidation) game with chips on the table. Now Fleet can be a part of how the national banking game plays itself out."
But the hammering of Fleet's stock Monday (its shares lost 6.7% on the news) suggest that the market fears Fleet may experience some of the same difficulty integrating BankBoston.