Cleveland-based KeyCorp said it is negotiating to buy a local investment banking boutique for an undisclosed sum.

KeyCorp said it hopes to close the purchase of Carleton, McCreary, Holmes & Co. by late July. While no agreement has been signed, KeyCorp officials were already calling the deal a "natural fit" because both companies work with midsize to large companies in the Great Lakes region.

The three-year-old firm, which primarily advises on mergers and acquisitions, said its clients include Figgie International Inc., M.A. Hanna Co., Revco Drug Stores Inc., and Rubbermaid.

Paul Carleton, the firm's managing director and founder, estimated that it worked on 11 transactions last year with a total value of about $250 million.

While the acquisition illustrates KeyCorp's interest in diversifying its business, analysts said it wouldn't be a significant deal relative to size.

"It's not going to make much difference from a practical standpoint," said Fred Cummings, an analyst with McDonald & Company Securities in Cleveland.

But Mr. Cummings, whose firm competes with Carleton, said KeyCorp is following the lead of other Midwest regional banks, such as Banc One Corp., Comerica Inc., and National City Corp., that have bought small investment banking companies,

Generally, the banks are looking for seasoned professionals, Mr. Cummings said. Carleton has 15.

"The question is, 'do you develop internally or do you buy it?"' Mr. Cummings asked. "The quickest way to get talent is to buy it."

Jack Kohl, group executive vice president for investment banking and securities at KeyCorp, said the deal "fits in with services we already provide our middle-market existing clients."

"What we hope to do here is leverage the franchise. This isn't a huge deal, but the key is not the number of people but the expertise."

KeyCorp began building its investment banking business in April 1995 when it acquired Spears, Benzak, Salomon & Farrell Inc. It received Section 20 securities powers from the Federal Reserve Board in February.

No definitive agreement has been signed for the Carleton firm, and the deal is contingent upon negotiations, approval from Carleton's board, shareholders, and regulators.

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