Bowles Hollowell Connor & Co., the Charlotte, N.C., merger-and- acquisition shop that First Union Corp. agreed to buy this week, specializes in a sector increasingly coveted by the largest banks in the nation-private equity and leveraged buyout groups.

The firm has represented more than 75 different private equity groups in at least one transaction during the last five years, according to Bowles Hollowell executives. Indeed, the skyrocketing LBO market has made this the biggest segment of Bowles' business in recent years.

"We've focused on private-equity sponsor groups for the last 15 years, since before that became a cohesive industry," said chairman and chief executive officer Steve Cummings.

Bowles Hollowell has closed about 140 deals over the last four years, with the size averaging about $75 million and ranging as high as $500 million, he said.

For First Union, also of Charlotte, the deal for Bowles Hollowell one of a series of recent deals opening it up further to investment banking activities.

In January it bought Wheat First Butcher Singer of Richmond, Va., which brought equity underwriting capabilities and enhanced First Union's merger and acquisition and retail brokerage efforts.

And also pending is a deal to buy CoreStates Financial Corp., Philadelphia, which has its own section 20 subsidiary as well as a small M&A effort.

According to First Union executives, Bowles Hollowell caters to the same companies that form the bank's core customer base: the middle market.

"From the beginning of the capital markets effort in 1993, we've made it very clear that we are focused on the middle market," said Ken Thompson, First Union's head of capital markets. "This acquisition adds to that."

The firm also has industry specialties in two areas that are mainstays at First Union, textiles and health care. In addition, it targets several industries in which First Union does not share its expertise, including automotive, food products and distribution, building products, technology, and aerospace and defense.

Although the price for Bowles Hollowell was not disclosed, Mr. Thompson said it is small "relative to the size of First Union."

He said he expects Bowles to add to First Union's revenues in the first year.

"We think it will affect our M&A income substantially. We also think that we are going to pick up substantial financing fees," Mr. Thompson said.

While praising Bowles Hollowell's strong M&A capability, Mr. Thompson said the niche firm would benefit from First Union's financing capabilities.

"We've got a complete product line including equity and debt syndications. And we've (the bank and the firm) been talking for about a year on how to marry those two strengths," Mr. Thompson said.

First Union executives have not yet decided whether the bank will try to build lending groups around Bowles Hollowell's industry specialties, bank officials said.

Upon completion of the merger, which is expected by April 30, Mr. Cummings will assume responsibility for the combined company's mergers and acquisitions advisory and private equity team.

The group will be known as Bowles Hollowell Connor, a division of First Union Capital Markets.

Mr. Cummings said he investigated between eight and 10 potential acquirers during the last year, once the industrywide trend toward consolidation had convinced him that this would be the best course to take.

He settled on First Union not just because it was a neighbor, he said, but because he thought it was the best strategic partner. "We think there will be an immediate benefit to clients and shareholders in both companies," he said.

Although First Union and Bowles Hollowell have not worked on any large deals together, "We've looked at many investment opportunities where they've been on the other side," said Mr. Cummings.

Thomas K. Brown, a bank equity analyst with Donaldson Lufkin & Jenrette, agreed that the huge boom in the domestic M&A market made this deal seem advisable for First Union.

"But I wouldn't go so far as to say this deal will alter their business. It's too small," he said.

First Union ranked 25th in M&A advisory in the first two months of 1998, closing three deals valued at a total of $301.7 million, according to Securities Data Co.

Mr. Brown commended the bank's tight focus on bringing capital markets expertise to middle-market companies, those with annual revenues ranging from $10 million to $2 billion.

All of First Union's recent acquisitions have focused on this market.

"They've done an excellent job building up their capital markets expertise, which is something that's usually associated with large markets," he said.

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