Merger Mania: Wall St. Smells Blood

LOS ANGELES - The announcement Monday that Chemical Banking Corp. and Manufacturers Hanover Corp. will combine has led to a feeding frenzy by investment bankers seeking lucrative merger business.

"The phone has been ringing off the hook," said Edward M. Carson, chairman and chief executive of First Interstate Bancorp, Los Angeles. By Tuesday morning, a New York-based investment banker was already cooling his heels in Mr. Carson's office, waiting to see the CEO.

Lots of other institutions are getting the same treatment. "The investment bankers have certainly been gracious in offering their services," a spokesman for Chase Manhattan Corp. said wryly.

A senior executive of a big West Coast bank agreed that investment bankers have found a new lease on life. "Everybody's got yesterday's ideas repackaged as today's," he said.

Jeffrey Peek, an investment banker at Merrill Lynch & Co., acknowledged that the Chemical merger gives a boost to the market, which slowed to a crawl late last year when bank stocks tanked. "Clearly this is a big, swift kick to get managements to consider consolidation," he said.

However, Mr. Peek noted that merger activity had already begun to pick up this year before the Chemical announcement, and therefore he doesn't think merger pitches are increasing dramatically. "You may see marginally more calling," he said.

Lawyers Stand to Gain

Lawyers are another group that will make out well if the bank consolidation wave picks up power. Referring to the law that requires the disclosure of mergers, one Wall Street lawyer said: "Just the Hart-Scott-Rodino filing [will be worth a] $1 million fee."

All of which raises the question of who stands to gain the most from the industry's consolidation.

"Everyone has been concerned about which stock to buy, Manufacturers or Chemical," quipped George Meiling, chief financial officer, Banc One Corp., Columbus, Ohio. "The stock to buy is Morgan Stanley," the investment banker of Manufacturers. "Those are the guys guaranteed to make money on this."

Sam Zuckerman in San Francisco contributed to this article.

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