Do actions speak louder than words? If so, then G. Kennedy Thompson should ease up and enjoy the reception First Union Corp.s merger deal with Wachovia Corp. got on Wall Street.
The response may have sounded like the new chairman and chief executive had executed the worst kind of betrayal in inking the agreement after having pledged, after all, to avoid major bank acquisitions.
Analysts early report cards (not all, but certainly many) included the oft-issued hold paired with guarded terms like lukewarm and less than optimum, as well as an occasional, scalding sell that in at least one research note was joined with an outright hate.
Those criticisms, in turn, prompted visitations and explanations from First Union and Wachovia managements that are ongoing, as Mr. Thompson and his Wachovia counterpart, L.M. Baker, sell the marriage.
But a look past what Wall Street said to what investors did, or didnt do, namely sell the stock by the truckload, shows maybe there isnt much convincing needed.
Since April 13, the last trading day before news of the deal broke, shares of First Union have fallen back by about 7%, a decline that in fairness came as banks overall were climbing about 5%, as measured by the American Banker 225 index. Given the strident tone of the reaction and the fate of some larger, costlier deals in the companys past, it seems a price small enough to suggest many see a deal that makes sense.
It indicates there is a pretty large audience out there that thinks this is a pretty good move, said Katrina Blecher, an analyst at Sandler ONeill & Partners. The merger is not without its positives, she said. The deal gets one competitor out of the marketplace, and its a very small premium, unlike some of the old First Union deals.
Putting aside the reversal of First Unions message, the deal corresponds closely to a fairly consistent message bankers have received from the Wall Street community regarding mergers and acquisitions. The rules include: Buy in manageable portions; use acquisitions to fill in or extend into contiguous markets (or business lines); add in fast-growing markets (or business lines); dont overpay.
Bankers have listened, and those words are now coming back, almost verbatim. The rules echoed over the last couple of weeks as bank managements made their seasonal conference appearances on Wall Street.
Just minutes into his formal assumption of the chairmans post at Bank of America Corp., Kenneth Lewis told shareholders the company would focus on wringing benefits out of its organization, with the days of the big deal behind it.
Deals B of A would consider? Mr. Lewis used different words, such as opportunistic, small, and asset management, but the themes were all there.
And Royal Bank of Canada vice chairman Jim Rager last week ruled out blockbuster deals but said purchases of smaller banks or asset management firms in high-growth areas were possible.
Charlotte, while perhaps the most interesting market right now, could soon have company.
Our view is that theres a great opportunity in Southern California, said Kenneth P. Slosser, managing director of Friedman Billings Ramsey & Co. in Irvine, Calif., at a recent M&A conference.
Theres literally an empty spot in the market, with very few institutions of $5 billion to $8 billion in size, Mr. Slosser said. That could pave the way, he said, for mergers-of-equals, the suddenly preferred model that only recently had been scorned for all its lack of clarity regarding leadership and direction.
Of course, these latest-generation mergers-of-equals are something other than, well, equal. First Union may call itself Wachovia, but it brings the vast majority of the assets to the table. The practice has been picked up in Europe, where on Friday, Bank of Scotland signed a no-premium merger-of-equals deal with the far larger Halifax Group PLC to create HBOS PLC.
Substitute the North Carolina names in this comment a London-based analyst gave to Dow Jones, and you get a pretty fair idea of how similar the markets are treating this deal.
Im sure Bank of Scotland shareholders would have preferred a premium, but I dont think this is a bad deal at all, and strategically it makes a lot of sense, said Christine Baalham, an investment manager at Investec Asset Management.
Of course, First Union did bend a fifth rule with its deal, one that goes well beyond M&A: Keep your promises.
Its also the rule almost designed to be broken, particularly in the age of Regulation FD, where managements cant offer up more material information in a closed setting than they have in public.
Its just not prudent to believe everything managements say in terms of deals theyre looking at and deals theyre not, Ms. Blecher said.
Nor will simply keeping ones word save a situation destined for failure. Prudential PLC learned that through its apparently failed bid for American General Corp. The U.K. insurer had been growing rapidly in Asia and made no secret of its intent to build a U.S. presence.
But for a variety of reasons and despite several favorable views on the deal Prudentials bid collapsed because investors dumped the stock relentlessly, and American General, whose share price was now tied to Prus, became easy pickings for the opportunistic American International Group. 
