In the wake of the two major bank acquisitions announced thus far in February, it is becoming clear that strategic priorities - not trading values - are driving the merger market.

The point is important, since many market observers have hinged a merger revival on the resurgence of trading values among predatory institutions. Unless superregionals such as Banc One Corp. again gain a pronounced trading advantage over weaker rivals, the conventional argument goes, the merger market will remain sluggish.

Undercutting that logic, this month's announced acquisitions of Shawmut National Corp. and Michigan National Corp. were not conditioned on acquirers having high stock multiples.

Instead, acquirers justified high purchase prices by citing the strategic goal of capturing market share. And the sellers cited the difficulties of independence for banks in their size category.

The two cases point up the degree to which current M&A activity is being driven as much by the strategic realignment under way in banking as by month-to-month changes in the stock market.

And it has caught the market by surprise.

Only a few weeks ago, analysts were downplaying speculation that Shawmut soon would be acquired. They cited a potential multi-billion-dollar price tag and acquirers' weak trading values.

And in the case of Michigan National, which earlier this month accepted a buyout offer from National Australia Bank, the high $1.5 billion price caught observers by surprise.

But in both transactions, managers of selling institutions went back on long-standing commitments to independence, essentially conceding that they couldn't go it alone.

And in both cases, the acquiring companies were willing to cough up more than most market observers expected in order to capture desired markets.

"Midsize banks are deciding they can't spend the money" on technology and product development being devoted by larger rivals, said Paul Sowell, an analyst with S.G. Warburg. "That is what is causing more acquisition activity."

From a buyer's perspective, "Fleet basically said it was willing to take dilution to extend its franchise in New England," said Mr. Sowell. "That is a big difference from attributing the merger" to a rising stock market, he said.

The recent upturn in bank stocks had many investors hopeful that the bank merger market would recover. But they overlooked the fact that the increase lifted all boats, acquirers and targets alike.

In fact, the Friday before the merger announcement, Shawmut enjoyed an 18% P/E premium to Fleet.

On average, in fact, targets enjoy a 10% advantage in price/earnings multiples over acquirers. And because the merger speculation unleashed by the Fleet-Shawmut deal spiked target prices, that premium could inflate to 15%, said Mr. Sowell.

Still, Shawmut was able to garner a hefty 1.8 times book value for its franchise.

This does necessarily mean the merger market can gain a full head of steam without the market's cooperation, however.

Fleet's stock price lost $3.25 Tuesday. That left Lawrence Vitale of Bear, Stearns & Co. wondering whether the Fleet-Shawmut merger would actually cool off the merger market.

"I would be taking a long hard look at how Fleet's stock performed yesterday if I were the major acquiring banks," said Mr. Vitale.

"You have to consider these other companies' future acquisition plans in the context of the market reaction," he added.

In that light, future deals may hinge strongly on the willingness of targets to accept less than optimal prices for the sake of closing deals.

"The merger market will be jump-started by an increasing recognition that things are going to get tough in 1996 for medium-sized banks," said a merger lawyer.

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