Now it's Dresdner Bank's turn.
After watching Union Bank of Switzerland and Deutsche Bank build up their U.S. investment banking and corporate finance franchises, the second- largest German bank is undergoing a similar effort in its American investment bank.
On Sept. 1, Dresdner combined its investment banking group in New York with that of Kleinwort Benson, the British merchant bank it bought last year.
And soon, AAA-rated Dresdner is expected to announce the formation of a new bridge loan fund, in conjunction with Bear, Stearns & Co., that experts say could approach $1 billion. A perennial investor in bank loans and bonds, the bank is looking to the bridge fund to help bring its participation in deals to the next level.
"In chosen sectors, we have the goal of being the agent or underwriter," said Patrick Connolly, an executive vice president at Dresdner. "We will originate a lot more on deals and will do a lot more to publicize our successes."
A 24-year Dresdner Bank veteran, Mr.Connolly is in charge of a host of functions for the commercial bank in the U.S., including commercial lending, treasury, derivatives, metal financing, trading, and loan syndications. Under his watch, the bank has begun to more aggressively advertise its services. It has hired about 100 executives, including a slew of investment bankers, to round out its staff.
These new recruits include Michael LaBarbera, formerly of SBC Warburg, to head private placements; Michael Metz, formerly of Deutsche Morgan Grenfell, as head of risk management; and John Sicialano, formerly of Technicolor, as co-head of corporate finance.
With the bridge loan fund, the bank appears poised to step up its efforts for business with middle market customers. Bridge loans are somewhat risky, short-term financing vehicles primarily used by borrowers to fund acquisitions. Banks that offer them are sometimes rewarded with a coveted agent position on related bank loans and bonds.
Skeptics question why Dresdner is entering the bridge lending field now. And they say Dresdner could have difficulty using that service to win lead positions in the bank loan syndication business.
"Frankly, I'm quite surprised to see Dresdner getting into this market," said a loan syndicator at one of the largest banks in the country. "Everybody in the world is jumping into this market right now."
Another lender described Dresdner as a "conservative participant that primarily participates in investment-grade transactions.
"The bridge fund idea took me completely by surprise."
But Mr. Connolly said the bank was comfortable with the high-stakes bridge loan market, despite its rocky history. In the 1980s, a bridge loan that went bad nearly sank First Boston.
"A lot of bridge loans were made by investment banks when they were not used to holding illiquid assets on their balance sheet," said the bow-tied Mr. Connolly. "All other things being equal, a bridge loan ought to be easier to analyze and ought to be less risky, because the bank doesn't hold it as long."
Dresdner has never been a big player in the loan syndication arena. So far this year, the bank has led four deals, and is ranked 36th in serving as agent or co-agent on bank loans, according to data from Loan Pricing Corp./Gold Sheets.
The British-born Mr. Connolly acknowledged that domestic and foreign banks are tripping over themselves to penetrate the lucrative leveraged lending market. He added that Dresdner has no interest in dominating the rankings of U.S. underwriters.
Instead, the bank plans to focus on originating loans in particular areas, including project finance, health care, real estate, and financial services. It will not, he said, try to compete for a ranking with U.S.-based institutions.
Mr. Connolly said Dresdner has a number of strengths that help differentiate it from the host of other banks attempting to offer the same range of services.
The executive pointed to Dresdner's $1.5 billion acquisition last summer of investment bank Kleinwort Benson. The combined North American operations is permitted to underwrite both debt and equity.
Kleinwort has broad geographic advisory capability, Mr. Connolly said, and has access to both the chief executive and chief financial officers of large companies. The primary contact for commercial banks with large lending operations is the office of the treasurer, which doesn't typically make broad strategic decisions about acquisitions.
Additionally, Kleinwort has solid relationships with European companies, which Dresdner hopes will allow it to participate in the increasingly active cross-border acquisitions frenzy.
On the leveraged lending front, Mr. Connolly disputed competitors' assertions that Dresdner is a novice. Its history in the business dates back to 1979, when it helped put together a deal that did not wind up getting done for City Investing. Dresdner also participated in the leveraged buyout of American Safety Razor in the early 1980s.
"It's a matter of perception," Mr. Connolly said. "We haven't really had an organized publicity campaign as many others have had."
The German bank is taking some proactive steps to build up its U.S. corporate finance and leveraged lending capabilities, and is investing an average of $10 million each in approximately 18 different equity funds, including those that invest in insurance, energy, media, and the emerging markets. It also plans to add more staff in the corporate finance area.
But some said hiring talent may be a challenge for Dresdner, particularly since Deutsche Bank and Union Bank of Switzerland have already doled out huge compensation packages for their own buildups.
"Dresdner's ability to attract the top level of talent is maybe on a par, if not slightly below UBS and Deutsche Bank," said Tony Lord, an executive recruiter at Ward Howell International.
Mr. Connolly declined to say how many more people he would like to add to his staff, which already boasts 140. But observers said the bank could be looking for as many as 40 people in the loan syndications, investment banking, corporate finance, and private placement arenas.
"The biggest weakness all these guys have is that they are starting with products, not with the relationships," said a lender at a foreign bank. "It's difficult to build a universal bank franchise without the relationships."
But Mr. Connolly remained confident in the bank's ability to tap its over 600 United States clients, as well as the relationships Kleinwort Benson established.
Ultimately, the bank would stand out from its peers, Mr. Connolly said.
"Execution and implementation will differentiate all the one-stop shops that everyone is establishing."
