NATIONSBANK-MONTGOMERY: LOVE AMONG THE HEAVYWEIGHTS Will splurging on Montgomery pay off for NationsBank? It's as if NationsBank Chief Executive Hugh L. McColl Jr. went on a blind date with Montgomery Securities Chief Executive Thomas W. Weisel on June 10, became deeply infatuated and rushed to the altar 19 days later. Weisel says he and McColl knew little about each other's companies when they met for the first time at Montgomery Securities' New York offices. ''They were not as aware as they should have been about Montgomery,'' says Weisel. ''We didn't know NationsBank that well, either.'' That didn't stop McColl, who heads the fourth-largest U.S. bank, with $239 billion in assets, from rushing to declare his vows to the San Francisco-based regional securities firm. ''There was no negotiation over price,'' says Weisel. ''We stipulated the price. McColl said 'done.''' Other suitors--ING Barings, BankBoston, and Societe Generale, say Street sources--fell by the wayside, scared off by the price. TOP DOLLAR. And what a price it was: $1.2 billion, plus $100 million in pay for nonpartners--a breathtaking 10.6 times Montgomery Securities' current book value of $113 million. Of that, $840 million is cold cash, with the remaining $360 million to be paid out in NationsBank stock over three years. Says one money manager: ''They are buying right at the top.'' McColl was willing to pay up because he is striving to make NationsBank a big player in investment banking. But so far, his grand vision has proven easier to enunciate than execute because of lax oversight, overaggressiveness, and numerous miscalculations. Now, after three big flops, McColl is adding the challenge of managing the autocratic Weisel, who is rumored to be making $100 million on the deal. ''You have two cults in these organizations,'' says a competitor. ''At NationsBank, you have a Hugh McColl cult; at Montgomery, it's a Tommy Weisel culture. Both have a 'do it my way' strategy.'' In 1993, NationsBank paid a princely $225 million to acquire Chicago derivatives firm CRT Group Ltd. It had no experience in trading for customers and has never met NationsBank's performance goals. In 1994, McColl had to close down a securities-brokerage partnership with Dean Witter Reynolds Inc. after a spate of regulatory actions and customer complaints alleging improper sales practices, which were settled or dismissed. And the firm is still struggling with a major staff buildup in investment banking launched in 1993 with great fanfare. After persuading dozens of high-profile Wall Street bankers to move to NationsBank's hometown of Charlotte, N.C., many quickly clashed with the bank's brass and were fired or left. NationsBank says it lost only 26 bankers, but a former executive says it was more than 100. In fact, buying Montgomery is really NationsBank's way of crying uncle. ''They realized they totally messed up and can't integrate a firm into the bank,'' says the former exec. ''They'll buy a big firm and get out of the way.'' LEAKS? One reason the companies could find it hard to meld is that each has an every-man-for-himself culture. Indeed, Montgomery has faced charges from competitors that it leaks research reports to favored clients ahead of public distribution. NationsBank's corporate-finance unit has a reputation for pushing the limits. Weisel, who will be chairman of NationsBanc Montgomery, calls the charges ''jealous ravings by clueless local competitors.'' NationsBank says it operates within the law and business ethics. McColl and Weisel believe 1+1 will be 3. Since both focus on middle-market, high-growth clientele, NationsBank's strong commercial-banking abilities should dovetail with Montgomery's strengths in equity financing. Still, though Montgomery ranks 13th in equity underwriting so far this year, in 1995 and 1996, it ranked dead last among the top 25 securities underwriters in the stock market performance of companies it brought public, according to Securities Data Co. Banking analysts now see McColl moving on to other prey, maybe a California bank, to become national. In the meantime, his new employees at Montgomery will be very busy...counting their money. By David Greising in Atlanta, with Kathleen Morris in Los Angeles and Leah Nathans Spiro in New York RELATED ITEMS TABLE: What the Match Has Going for It--And What Could Go Wrong

Updated July 4, 1997 by bwwebmaster
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