Are you ready for the financial services giant Merrill Lynch & Chase Manhattan & Prudential?
That's just one of the fantasies bandied about by people on Wall Street last week after Congress agreed on a bill that would allow a jumbling of financial service businesses by obliterating the Glass-Steagall law, which has created a wall since the 1930s. There's no evidence any of those companies are really talking about a merger, but that hasn't stopped Wall Streeters from wondering.
Even the small fry are dreaming.
"I immediately said, 'How does this affect me?,' " said Kenneth Pasternak, chief executive of Knight/Trimark Group, a brokerage whose electronic trading system has long made it an appealing takeover target by huge institutions.
A company like Knight/Trimark could legally be acquired only by another securities firm, leaving its pool of potential suitors at just a handful of companies such as Merrill Lynch & Co. But all that will change in the coming weeks if President Clinton signs the banking bill into law as expected, allowing insurance companies, banks and securities firms to come together under one roof.
"It increases the universe of buyers to about 100," said Pasternak, who hastened to add that Knight/Trimark is not for sale. "We're considered, in some ways, an Internet company. And a lot of people want a stake in e-commerce."
Investors apparently expect a wave of mergers, pushing up the stocks of several companies last week, including Prudential Securities and John Hancock Mutual Life Insurance Co.
But the stocks were deflated after some analysts speculated that the financial services overhaul would not stir up as many acquisitions as people expected.
"There are buyers and sellers out there, but I don't see an immediate consolidation of the entire industry," said Rhonda Rosen, managing director of Putnam, Lovell, de Guardiola & Thornton Inc. "Not all insurance companies feel a need to own a bank." The focus, she said, is to "keep the consumer dollar in the family." But many companies have already found ways to do that.
Citigroup, for example, went through a buying spree in recent years that made it the closest model to a universal bank, counting on the removal of Glass-Steagall.
"The reason banks want to be insurers," said Scott Willkomm, a banker at Prudential Securities, "is that insurers have customer reach that the banks currently don't have. So it's easier to buy it than to build it out."
Willkomm agreed that this won't "open the floodgates." But, he said, "we are entering a brave new world of finance."