Chase Manhattan Corp.'s co-advisory role to American Home Products Corp. in its $72 billion merger deal with Warner-Lambert Co. is one of countless examples of the banking company's ability to capitalize on long-standing relationships.

Now that Pfizer Inc. has responded with a competing hostile bid for Warner-Lambert, the high-profile deal may offer Chase something else: a chance to show it can compete in an M&A heavyweight fight on a deal that does not involve its dominant lending operation.

Though Chase has been moving to build its merger advisory business, doubling its head count since 1997, it is not yet considered one of the major players, except in cases where lending is a factor.

"In deals with the larger, traditional companies, you have to conclude that the bank is still reliant on its banking relationships," said David Dennis, co-head of the health-care group at Donaldson, Lufkin & Jenrette Securities Corp.

Douglas Braunstein, Chase's co-head of global mergers and acquisition, does not dispute that its latest role is a reflection of its ability to cross-sell.

Chase has been American Home Products' bank since 1921. In addition, American Home's chairman and chief executive officer, John R. Stafford, sits on the Chase board of directors.

"The deal shows that we've been able to develop strong initial financing relationships into ones that are much more strategic in nature, and that are far more fundamental to a company's existence," Mr. Stafford said. However, he noted, lending plays no role as yet in the Warner-Lambert stock swap.

Chase's M&A strength will be rigorously tested in this latest transaction, though it is working with a top-tier partner, Morgan Stanley & Co., in representing American Home. Rival Pfizer is challenging with a higher bid and has enlisted Merrill Lynch & Co. and Lazard Freres Inc.

The bid "changes the nature of the assignment," Mr. Braunstein said. "But we know how to handle large, multifaceted mergers and acquisition transactions."

Equity analysts who follow Chase say they are pleased with its strategy of using corporate banking to build its investment bank. The company is expanding its market share, said Michael Ancell of Edward Jones in St. Louis.

Still, "If Chase starts to win mergers and acquisition or other mandates for corporations that it doesn't have a corporate banking relationship with, it would be a sign that it has really arrived, that someone is really taking them seriously," Mr. Ancell added.

Chase has been on a hiring drive to build up its investment banking. Mark Davis, the former co-head of mergers and acquisitions at Salomon Brothers, who is now Mr. Braunstein's counterpart at Chase, joined in April 1996. Mr. Braunstein, formerly managing director in mergers and acquisitions at Merrill Lynch & Co., came on board the next year.

Under their leadership, the $371-billion asset company's M&A group has expanded to 150 bankers worldwide, from 80 two-and-a-half years ago.

Chase's recent agreement to buy investment boutique Hambrecht & Quist Group may help it "move into a more middle-market advisory, which is not as much driven by banking relationships," DLJ's Mr. Dennis said.

Chase has had noteworthy M&A success in other industries. Last year it advised GTE Corp. on its merger with Bell Atlantic Corp. in a transaction valued at $80 billion. In September, Chase acted as an advisor to CBS Corp. in its proposed merger with Viacom Inc.

Over its relationship with American Home Products, Chase has provided merger advice on smaller deals. In 1994, when American Home acquired American Cyanamid, Chase led a $10 billion syndicated loan.

In 1996, Chase helped the Madison, N.J., company find a buyer for its foods products division, and in 1997, it advised American Home, which is best known for making Advil pain reliever on its sale of the medical device maker Sherwood-Davis & Geck.

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