BT Wolfensohn advised Felcor Suites Hotels Inc. on its $1.2 billion deal, announced last week, to buy Bristol Hotel Co.'s real estate assets.
The deal would make Felcor the third-biggest hotel real estate investment trust in the country.
Bankers Trust and Wolfensohn have worked on $5.2 billion of Felcor deals, including this one, in just three years. That kind of relationship typifies the banking company's approach to its mergers and acquisitions advisory practice, which focuses on the lodging and gaming industry.
The 1996 purchase of Wolfensohn & Co. by Bankers Trust New York Corp. drew jeers from the start. Critics pointed out that new firm would be low in the league tables, and indeed last year it ranked 15th in the M&A advisory business, having advised on $47 billion worth of deals, according to Securities Data Co.
But the success of the lodging and gaming practice is an example of Bankers Trust building on what it bought, observers said.
"To look at the purchase of Wolfensohn in terms of number of deals they have done doesn't make much sense," said John Otis, an analyst who follows BT Alex. Brown for Fitch IBCA Inc.
With Wolfensohn, Bankers Trust "established itself as a global M&A adviser with a modest investment, and for marketing and credibility purposes, it was a brilliant move.
"Wolfensohn is a well-recognized brand name, and I think they got a lot of mileage out of it," Mr. Otis said.
In the past two years the lodging and gaming group has lent over $14 billion to the lodging industry and has been involved in $24.9 billion worth of M&A and securities transactions for hospitality companies. In 1997 the bank advised on about $10 billion of real estate mergers and acquisitions, the bank said.
BT started beefing up its lodging and leisure practice in 1994, when few other banks were willing to put out the welcome mat for hotel companies in need of financing.
By so doing, BT got in on the ground floor of major corporate relationships with such companies as Felcor, Bristol, Host Marriott, and Starwood Hotels and Resorts. Many of these companies have initiated some of the most prominent real estate transactions of the late '90s.
"In the four very short years that BT has been building its effort, BT has gone from being just a participant to being one of the leading bankers to the hospitality industry," said Bjorn Hanson, hospitality industry chairman at Coopers & Lybrand LLP.
"The thing it did better than anyone could have imagined was picking the companies to focus its attention and resources on."
BT executives say that in the face of new competition, they plan to maintain their focus on quality relationships and transactions-not quantity.
"In our M&A business, not just in hotels but in all industries, we have a very simple approach: We do deals that make sense and create long-term shareholder value, and don't do deals to simply and selfishly lengthen the deal list," said Monte M. Koch, a managing director and head of the lodging and gaming practice at BT Wolfensohn. "It's an important distinction."
Jacques Brand, managing director and head of the lodging and leisure investment banking practice at BT Alex. Brown, said, "The M&A business can be, and for many shops has become, a volume-driven business orientation, and we don't necessarily take that approach.
"Senior managements trust us, and we are truly a member of the family. That's a distinction that not everybody can make about the majority of their M&A relationships.
"It's great to show a deal list a mile long, but what you don't see reflected in that list are all of the transactions we've worked on, analyzed, and at the end of the day, decided don't make sense for our clients," Mr. Brand said.
The Bankers Trust executives said the group will continue to mine its coveted relationships, and will be looking to European markets for new opportunities.
In Europe, they said, the strong equity research team coming over from National Westminster Bank PLC should help. In a deal announced in December, the U.S. company will be buying the British one's European equities business.
