In New Family, Investment Rivals to Be Siblings

The planned merger between NationsBank and BankAmerica would unite two bitter rivals in the investment banking business.

Montgomery Securities and Robertson Stephens & Co., the San Francisco securities firms acquired by NationsBank Corp. and BankAmerica Corp. respectively, have been blood enemies for more than 20 years.

Now, the two are set to become units of the same corporate parent.

On Monday, the merger partners said it was premature to discuss the structure of the combined banking company's section 20 securities unit. But observers said it is unlikely that Sanford R. Robertson, chairman of BancAmerica Robertson Stephens, and Thomas Weisel, chairman of NationsBanc Montgomery Securities, would share power in the long term.

Both executives can trace their roots to Robertson Coleman, a predecessor firm to Robertson Stephens. But Mr. Weisel split from that firm in the mid-1970s after arguing bitterly with Mr. Robertson over the direction it should take.

Mr. Robertson favored relationship-style investment banking; Mr. Weisel went on to found Montgomery Securities in order to build a stronger trading operation.

One insider dismissed rumors about the firms' longtime rivalry as "ancient history."

"I think the rivalry between BankAmerica Robertson Stephens and NationsBank Montgomery is no different from any other rivalry in the marketplace," the insider said.

But even if the firms' relationship is harmonious, the pending marriage of their parents is likely to result in job cuts and defections from each, observers said.

Although Montgomery has a much larger trading operation, both have focused their investment banking capabilities on Silicon Valley high-tech issues.

"There's bound to be a substantial overlap in terms of people," said Samuel Hayes 3d, a professor of finance and investment banking at Harvard Business School. "My guess is there's going to be a very painful process of rationalization."

Some top investment bankers at rival firms said they started rubbing their hands in glee yesterday, in anticipation of picking up new talent.

Most competitors agree it's too soon to determine which investment banking subsidiary would win out if there are staff cutbacks. Some point to the proximity between BankAmerica and Robertson Stephens, which share the same building in downtown San Francisco, as an important factor in the winnowing process.

They say top wholesale bankers at BankAmerica are closer to Robertson Stephens, which would benefit those at the subsidiary in areas where there are redundancies.

Others predict Montgomery would have a slight advantage. Besides its greater sales and trading capacity, Montgomery investment bankers cover a wider range of industries. And Montgomery benefits from an aggressive chairman.

Banks are buying into investment banking to secure their middle-market customer base, analysts said. Either Montgomery or Robertson Stephens alone would have served this purpose.

That indicates how recently NationsBank and BankAmerica decided to merge, observers say. Otherwise, how could they justify the $1.2 billion price tag for Montgomery and the $540 million price tag for Robertson Stephens.

"It's important that one or the other investment banking house survives, and the risk is that they break both of them," said Jay Tejera, Dain Rauscher's managing director of research.

"There's already an oil-and-vinegar type of relationship between the commercial banking culture and the investment banking culture. And now you have two banks and two investment banks."

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER