Don Smith, head of the M&A group at Houlihan, Lokey, Howard & Zuki, also told CNNfn's "Business Day" it would take Citigroup "at least a couple of years" to realize the desired productivity gains.

Here are excerpts from that interview:

JOHN DEFTERIOS, CNNfn ANCHOR, BUSINESS DAY: A phenomenal merger being announced here. Two giant names getting even larger with assets of $700 billion. Nobody's sitting idle at all. They really do want to get these efficiencies and that's the number one motive here?

DON SMITH, HOULIHAN, LOKEY, HOWARD, & ZUKIN: Yes. It's been rumored for years that Citicorp was going to merge with a major investment banking and financial services company. It looks like they finally are going to do it.

DEFTERIOS: What I find interesting is that the two personalities - very powerful personalities -- of these two individual groups -- John Reed of Citicorp, Sanford Weill of Travelers - are going to share the duties of this colossus. What do you think of that going forward? Do you like putting them under an umbrella - to use the symbolism of the Travelers' umbrella?

SMITH: Well, that's clearly what's happening throughout the world is these big financial service firms are merging and it's going to be an awfully difficult company to manage with one person. So, I would imagine, at least in a transition period -- two people will have enough to do.

DEFTERIOS: What's the exercise of marrying very large groups like this shown us in terms of its productivity gains? How long does it take to realize and to push something through like this to get the efficiencies that they're all looking for?

SMITH: I think it's going to take at least a couple of years. In many respects, these companies are different. Travelers is a big brokerage firm through Salomon Smith Barney, big insurance operations, big money management operations. So, these are all separate in essence with respect to Citibank's banking operations, except there are certain insurance, investment banking, and asset management that -- operations within those firms are going to have to merge together.

DEFTERIOS: One hundred million clients in 100 countries around the world - that's something you can market quite easily. We saw Morgan Stanley and Dean Witter come together - two very different cultures. So far, though, the word from inside is that they're working quite well together. Do you see any sort of hitches with the two of these coming together?

SMITH: It's really hard to call. I think Chase and Chemical merged very efficiently. I would imagine that Citicorp and Sanford Weill at Travelers have learned those lessons by observing them and that there will be fairly efficient operations being merged together. But it will take time.

DEFTERIOS: Don, the other thing I find interesting about this trend is that nobody's sitting idle. Just when you see the profit squeeze starting to kick in after all these productivity gains and earnings growth gains we've seen over the last two years, these companies are buying their earnings growth by basically merging, and that's not going to stop?

SMITH: Yes. Most of the cost-savings have been squeezed out of these companies and as a result, you're seeing the consolidation phase occurring where, you know, two companies can get together and save overhead costs; save distribution costs - and that's what's happening. And these companies feel like they have to compete worldwide today -- Asia, Europe, Latin America -- and they need consolidated operations really to move forward and offer all services to all clients.

DEFTERIOS: I think it's also useful to put into context that number that we had on the graphic coming into the interview with you -- $234 billion worth of transactions before this one announced today; 2,300 plus mergers already. That is a phenomenal pace. It'll break all records in the past.

SMITH: I think the M&A markets were up about 10 percent through March, and I think this merger alone will substantially increase that growth over the last year.

DEFTERIOS: Well, because of the valuations we're seeing in the stock market and the gains we're seeing with individual stock prices, are companies overpaying right now? Are they a bit too willing to pay a higher price to make sure that they get the transaction done? What's your read?

SMITH: Well, if they're paying stock, both currencies are perhaps at the high level, so it really depends upon the relative P/E ratios when one company buys another for stock. If a company buys - with a P/E of 25 buys a company with a P/E of 20, it's going to be accretive, not dilutive. So, it really doesn't matter. When you start paying cash -- when you overpay for cash, then you're borrowing money, and that could be a long-term problem.

DEFTERIOS: You don't see that, of course, in this today. This deal today is a stock swap transaction, but you don't find companies are taking on enormous amounts of debt, like they did in the '80s, to make sure these things happen?

SMITH: Well, there's a lot of debt being taken on and it's worrisome, but I think it's being taken on a little bit more prudently than it was in the '80s. So, I think we have less to worry about than we did.