Who would have thought it? Chemical buying Chase. Wells launching a hostile bid for First Interstate. First Union swallowing First Fidelity. In 1995 - the year of the deal - the unthinkable became the norm.

During the past 12 months, more capital was spent buying banks and thrifts than in the preceding three years combined. In all, a record $73 billion of deals were announced.

As with most historic trends, the megamergers were sparked by a confluence of forces: a bull stock market, the domino effect created by the initial blockbuster deals, diminishing industry revenues, and the lifting of the remaining barriers to interstate banking.

Many observers expect the deals to keep on rolling into 1996. In just the past month, Bank of Boston Corp. bought BayBanks Inc. and Fleet Financial Group snapped up Natwest Bancorp.

"We are in the midst of the fourth inning of a long-term merger cycle that began this year," said Edward Herlihy, a partner with Wachtell, Lipton, Rosen & Katz. "The push to consolidate is inexorable."

To be sure, next year's deals may not be quite as large as those in 1995, when 10 transactions each topped $2 billion.

"The big banks will probably take a breather and digest what they have acquired, and we will probably see an increase in the number of transactions in the range from $100 million to $350 million," said Robert Baer, director of financial institutions mergers and acquisitions at Bear Stearns & Co.

Still, plenty of big players have yet to make their moves. BankAmerica Corp., NationsBank Corp. and Banc One Corp. largely sat out the great merger feast of 1995.

Mr. Herlihy notes that more than 80 companies have market capitalizations of $1 billion or more, while another 40 have market caps between $500 million and $1 billion. "There is a vast amount of consolidation that will take place in this range," he says.

Ironically, the merger that started 1995 off has a lot in common with the one that will close the year. The $1.6 billion February purchase of Michigan National Corp. by National Bank of Australia was sparked by a bitter shareholder battle to sell the bank.

And the principal protagonist in that struggle, investor Michael Price of Heine Securities, has now become one of the first shareholders to publicly state a preference for Wells Fargo & Co.'s hostile bid for First Interstate Bancorp.

First Interstate is now at the center of a major struggle between Wells and First Bank System Inc., which last month signed a $10 billion agreement to purchase the Los Angeles bank. Like Michigan National, Interstate's fate rests largely with shareholders.

Mr. Price runs like a thread through the year. His surprise 6.1% stake in Chase Manhattan Corp., revealed in early April, started a four-month process that culminated in the sale of the storied money-center to uptown rival Chemical Banking Corp.

His blunt brand of investor activism, uncommon in the cozy bank industry, opened a can of worms. Institutional ownership of banks of all sizes rose, with investors increasingly vocal.

Other banks once thought untouchable also fell: Meridian Bancorp to CoreStates Financial Corp., Shawmut Financial Corp. to Fleet Financial Group. First Chicago Corp., meanwhile, merged with NBD Bancorp.

What made it all possible, in part, was Wall Street's acceptance of the deals. There were some dissenters who decried what they termed the high prices paid for some banks, but they were few.

Only one deal, the failed merger of CoreStates and Bank of Boston, drew universal scorn. Analysts blasted the plan for a lack of synergy and for apparent attempts by top executives to cement their jobs.

But most merger stories were the same: after one blockbuster bank merger, investors and analysts would pressure the next bank to merge.

With spiraling technology costs, and falling revenues, most banks had no choice. And as strong new competitors moved into their backyards, banks rushed to find merger partners.

Where will the next mergers hit? The Midwest and Southeast are ripe, analysts said. Virginia, Missouri, Wisconsin, and Alabama could be the hot states fir mergers and acquisitions in 1996, said Michael Diana, a bank analyst with Bear Stearns.

Takeover candidates in these states include Amsouth Corp., Boatmen's Bancshares, Crestar Financial Corp., and Firstar Corp.

Also high on takeover lists are business lines like securities processing, mortgage units, and money management. Mr. Baer, the investment banker, says that several regional banks have indicated an interest in acquiring regional broker-dealers.

Ultimately, it is the stock market that probably will determine the fate of the merger wave. The American Banker index of the top 225 banks rose 45% this year. If stock prices - the chief currency for acquisitions - keep climbing, deals are sure to be plentiful in the year ahead.

But if banks stocks fail to rise - or fall - the boom is almost sure to lose some oompf. But even that happens, it was quite a ride.

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