It was a two-horse race between Morgan Stanley & Co. and Goldman, Sachs & Co. last year for the top spot among Wall Street firms advising bank mergers and acquisitions.

Morgan Stanley edged out Goldman by a nose to claim the honor in 1995, the year of the deal in banking, according to SNL Securities.

This was a major advance for the venerable New York firm, which had finished 11th the previous year.

Led by managing director Donald Moore, Morgan Stanley's team served as advisers on nearly all of the year's major transactions: First Interstate Bancorp's sale; Chemical Banking Corp.'s purchase of Chase Manhattan Corp., Meridian Bancorp's sale to CoreStates Financial Corp., and Fleet Financial Group's purchase of Shawmut National Corp.

The firm is credited with advising on $42.5 billion in deals, a figure that includes its advice to Banco Santander in the $5.4 billion sale of First Fidelity Bancorp. to First Union Corp. The Spanish bank was First Fidelity's largest shareholder.

But even without that deal, Morgan Stanley would have just edged out Goldman Sachs for top honors.

"We were reasonably well positioned for the extraordinary level of activity which occurred in 1995," Mr. Moore said.

"While I do not believe we will see the same level of overall activity in 1996, the secular and cyclical trends which fuel the consolidation activity in 1995 are still in place and should contribute to a fairly high level of activity in 1996 and beyond," he said.

Goldman Sachs came in second after last year's first place finish. It, too, advised on nearly all the major deals of 1995, and partnered with Morgan Stanley in advising First Interstate during its attempted sale to First Bank System Inc., and the pending sale to Wells Fargo & Co.

The $10 billion in credit both firms received for the First Bank deal will be dropped from their 1995 totals. The $11.5 billion Wells deal will be credited to their 1996 totals.

The domination of the two New York based firms mirrored the year in general. The big Wall Street investment banks had a very good year.

While smaller deals in 1994 led to a preponderance of regional investment banks in the top spots - six of the top 14 slots belonged to regional investment banks that year - in 1995, 13 of the top 14 advisers were New York firms.

Only San Francisco-based Montgomery Securities, which came in eighth, prevented a clean sweep by Manhattan-based investment bankers.

Also unlike 1994, few commercial banks broke into the top echelons of bank advisers. J.P. Morgan & Co. placed fourth.

That position included, however, advice to First Bank System in its scuttled $10 billion agreement to buy First Interstate. Without that, the bank falls out of the top 10.

UBS Securities, a division of Union Bank of Switzerland, placed 10th. It had advisory roles on U.S. Bancorp's purchase of West One Bancorp, and Fleet Financial Group's purchase of Natwest Bancorp. Much of UBS' bank group came over from Salomon Brothers earlier in the year.

Salomon Brothers, largely on the basis of its role in Fleet's purchase of Shawmut National Corp. - done by the same advisers who moved to UBS - placed ninth.

A new entrant in the top rankings of merger and acquisition advisers, at No. 5, was James D. Wolfensohn Inc. It guided Chase Manhattan Corp. in its sale to Chemical Banking Corp., and NationsBank Corp., in its purchase of BankSouth Corp.

Smith Barney was 12th after failing to place the previous year. Smith Barney wrote PNC Bank Corp.'s fairness opinion for its $3 billion deal to buy Midlantic Corp.

Lazard Freres & Co., after finishing second last year, came in sixth on the basis of two deals - First Fidelity's sale to First Union, and the NBD- First Chicago merger of equals.

Keefe, Bruyette & Woods Inc. moved up to seventh place from ninth last year. The firm advised on 20 deals, the second most number of advisory deals of the year. Finishing first in that race was the fairness opinion king, Sheshunoff & Co., Austin, Texas.

After their strong showings in 1994, a number of regional advisers dropped significantly in the rankings last year. Wheat First Securities, Richmond, Va., after finishing ninth last year, slipped to 28th place.

Stifel Nicolaus & Co., St. Louis, fell from 12th place to 23d. And Alex. Brown & Sons, Baltimore, dropped to 17th place from 10th.

Some regional firms drastically improved, however. Hoefer & Arnett Inc., San Francisco, moved up from 50th place to 25th, tripling is deal value volume. And Ryan Beck & Co., West Orange, N.J., moved up from the 21st to 15th.

Among legal firms, New York's Skadden Arps Slate Meagher & Flom gained the top spot, moving up from fifth place.

However, as legal adviser to First Interstate, the firm received credit for $10 billion from the First Bank deal.

When that is subtracted, the No. 1 spot belongs to the venerable New York law firm of Sullivan & Cromwell, which advised Wells Fargo & Co. and will, like Skadden Arps, receive credit for the First Interstate merger in 1996.

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