TUCSON, Ariz. - Low bank and thrift stock prices have mergers and acquisitions on the mat by most accounts, but speakers at a recent conference here put a reverse spin on the situation:

Low prices should actually aid M&A, they argued.

In the last quarter of 1994, bank M&A came to a virtual standstill matched only by the recession year of 1990.

Plunging equity prices, sparked by investor fears about the effect of rising interest rates on banks' margin spreads, left sellers unwilling to take devalued shares, and buyers unwilling to issue more shares to fill the shortfall.

"Ironically, a period of low stock prices is generally an excellent time to sell if the seller's focus is not so much on the dollar price achieved, but rather on the exchange ratio of the buyer's stock they receive," said J. Christopher Flowers, managing director and co-head of financial institutions M&A at Goldman, Sachs & Co.

Merger prices do not fall as quickly as stock prices, he explained. Therefore merger ratios are higher during periods of low stock prices.

In 1990, the average superregional price-to-earnings multiple was 5.8, he said, while the average merger multiple was 14.1. In 1993, a period of high stock prices, the average regional multiple was 9.8, and the average merger multiple 16.2.

The real exchange ratio declined nearly a third as stock prices rose, Mr. Flowers pointed out.

Sellers need to focus more on the long-term value of the stock received rather than the immediate conversion gain, added Gail M. Rogers, managing director at J.P. Morgan & Co.

Most acquirers' stock are undervalued, she said, so the chance for appreciation is significant.

At Compass Bancshares in Alabama, a dissident shareholder group led by former chairman Harry Brock recently called for the sale of the bank, reasoning in part that now is the time to receive a superregional acquirer's stock in a swap, before those shares rise again.

Strategic Research Institute sponsored the conference.

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