First Union Capital Markets plans to add some 20 professionals to its mergers-and-acquisitions advisory team in 1998, bringing the group's total to 35.

The growth is expected to come from a combination of new hires and from First Union Corp.'s pending acquisitions of CoreStates Financial Corp. and Wheat First Butcher Singer, said Raymond Groth, managing director and co- head of M&A.

The game plan is to build an advisory business that keeps First Union's middle-market clients from turning to Wall Street firms for this service. It is a strategy that other regional banks are also looking to employ, analysts say.

"I see M&A as an area where banks have a natural advantage with smaller and middle-market companies," said Michael Ancell, a bank analyst with Edward Jones & Co. The regional brokerage firms "just aren't going to have the depth of product offering" as these banks, he said.

"First Union already has the relationships, and when they combine that business base with the recent purchases of a brokerage firm, they've got a natural base to build on," Mr. Ancell added.

So far this year, Charlotte, N.C.-based First Union has played an advisory role in 21 announced or closed transactions totaling about $3.5 billion, according to Brian McDonagh, managing director and M&A co-head. That is up from five transactions worth $200 million in 1996.

The team recently advised Hester Industries, a Winchester, Va.-based manufacturer of poultry products, on its acquisition by ConAgra Inc., a diversified food company based in Omaha, for an undisclosed sum.

First Union has a long-standing relationship with Hester. The bank has provided the company with bank loans, private banking, trade finance, and cash management services.

"First Union played a critical role in helping us through every stage of the transaction process," said Wendell Hester, founder and chairman of Hester Industries, in a press release.

A veteran of First Boston Corp., Mr. Groth came to First Union in 1994 to start building its M&A business. Mr. McDonagh joined in 1996 from Chase Manhattan Corp., where he was a managing director in the global mergers and acquisitions group.

After building more critical mass, the executives plan to give the group more of an industry focus and put M&A professionals in regional offices.

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