Of all the angry reactions to the merger talks between of Bank of Boston Corp. and CoreStates Financial Corp., perhaps none was as memorable as that from Brown Brothers Harriman analyst Nancy Bush.
When news of a deal in the works was leaked, Ms. Bush quickly lowered her rating on Bank of Boston to "avoid" from "buy" and said the union would be judged an "abomination."
After the deal fell apart, she was clearly pleased. "Of all the deals that I have ever encountered, that would have been by far the worst," she said. "The only thing those banks have in common is the lack of credibility of their managements."
Analysts said that several factors wound up killing the deal, among them the almost universally vitriolic Wall Street response.
Known for her outspoken and blunt analyses, Ms. Bush said that her response stemmed from having followed Bank of Boston since 1982.
"I had seen the company through every crisis imaginable, including money laundering, currency reporting violations, the LDC debt crisis, the real estate crisis ... This potential deal just seemed particularly egregious to me," said Ms. Bush "That was the basis of a really gut reaction."
Ms. Bush said her strong reaction wasn't for the benefit of short-term investors who have flooded the market in search of a quick takeout premium.
"The people who have been long and patient shareholders are those for whom a possible merger of equals that didn't make sense was most problematic," she said.
Ms. Bush said that her strong opinions and blunt approach to the market come from an upbringing that focused on reading and analysis.
The analyst, no relative of the former president, said she comes "from a family of strong characters ... a very heavily events-oriented family."
She said she remembers learned debates between her father and grandfather over the merits of various government policies.
Well-formed opinions clearly did not skip a generation.
As an analyst who doesn't work for an investment banking firm that underwrites bank debt, Ms. Bush has the luxury of speaking her mind.
"Analysts in general that do not have the influence of an investment bank can be far more forthcoming with their opinions regarding transactions such as the merger," said Gerard Cassidy, an analyst with Hancock Institutional Equity Services.
"I have never been anywhere where I have done an extensive amount of investment banking," said Ms. Bush. "And that's by design. I've chosen places where there is room for a voice like mine that can be critical of deals."
But Ms. Bush thinks criticism can go too far.
"Wall Street's view is so narrow and nearsighted about deals," said Ms. Bush. "I really think we're going to have to start thinking in some more original and creative ways about whether these deals work."
Bank consolidation can create the opportunities for singles and doubles, as well as home runs for shareholders, she said.
One merger that has received a mixed response in the analyst community but that she endorsed was the First Union-First Fidelity deal.
She called the retention of Anthony Terracciano of First Fidelity a "coup" for Ed Crutchfield. "Tony brings a discipline in acquisition strategies that hasn't always been present at First Union," she said. First Union adds tremendous technology and product delivery systems to First Fidelity, she said.
"We've got to start focusing more on the qualitative rather than quantitative," she said. "The out-of-market deals are happening and are going to happen. You have to look for rational, logical presentation."
Thomas K. Brown, a bank analyst at Donaldson Lufkin & Jenrette, said that Wall Street analysts often react negatively to mergers, and nearly as often are wrong.
Ms. Bush, however, said that criticism of deals adds value to the amount of available information in the market. "You get a whole spectrum of analytical thought on these deals," she said. "All the way from investment banking houses to people like me who can afford the luxury of hating deals."
When the process is done right, she said, "there is a tremendous value from having the questions raised in such a way that management and boards of directors can say, wait a minute, we might have missed something."
Ms. Bush said that she thought the defeat of the Bank of Boston- CoreStates merger might squelch similar deals in the short term but probably hadn't taught the market any particular lessons.
"I'm hopeful that there has been a lesson learned," said Ms. Bush, "but I'm not optimistic that it's anything other than a cooling-off period."
For bank management to learn a lesson, she said, it will "take the voting down of a deal (by shareholders) to really squelch the doing of mergers for other than economic reasons."