Investment, Private Bank Cornerstones of Deal:<br /><i>For Chase, open doors in Europe; for J.P. Morgan, the benefit of H&amp;Q's New Economy expertise</i><br />

SAN FRANCISCO - Even before pairing up with J.P. Morgan & Co., Chase Manhattan Corp. executives, asked how their company took advantage of its vast corporate bank franchise to get plum equity and advisory assignments, would point to big deals abroad.

For example: Chase H&Q, the equities and advisory division formed after the acquisition of Hambrecht & Quist Group, was able to muscle into an advisory role for a Chase lending client - Telecom Italia - that had some New Economy business to transact.

"We had dealt with their venture capital group previously," said Cristina Morgan, co-head of investment banking at Chase H&Q.

Whether H&Q, still essentially a fledging establishment in Europe, or Chase's corporate bank would have won such a coveted advisory spot on its own - working on the European phone giant's spinoff of the Internet service provider Tin.It - is an open question.

Add J.P. Morgan's platform, and suddenly Europe looks wide open for Chase. Morgan, after all, put its investment banking roots down in Europe almost a century ago, well before it started doing advisory and underwriting work in this country.

Morgan has traditionally targeted the biggest European corporations and governments; last year, it was an adviser on the German phone giant Mannesmann AG's $198 million deal to be acquired by Britain's Vodafone Airtouch PLC.

This is all good news to Chase, which is keen to build its platform to the likes of Goldman Sachs Group Inc and Morgan Stanley Dean Witter - two American bulge-bracket firms that, along with their competitors, have been working feverishly to cash in on the European investment banking boom.

"Half of our revenues will be from outside the United States," said Marc Shapiro, Chase's vice chairman, in addressing some of the benefits of the merger in a joint conference call Wednesday morning. "Our friends from Morgan think in global terms," he said.

Certainly, J.P. Morgan's domestic investment banking franchise is a big part of the attraction for Chase as well.

Though Chase had pulled in investment bankers with contacts in more mature, traditional industries like industrials, particularly with the acquisition of the Beacon Group in July, its equities and advisory business has shined most strongly in Hambrecht & Quist's emerging growth sectors.

In the first half Chase ranked fourth in U.S. high-tech merger advisories, with a 16% market share. In overall U.S. advisory mandates, it ranked eighth.

Even so, Chase was still able to outflank J.P. Morgan, which ranked fifth in high-tech M&A, with a 10% market share, and 11th in overall merger advisories.

But the big question for Chase is whether it will be able to grab market share from the top three firms in the United States and Europe, who take up about 50% of the equity and advisory market.

"Now Chase has more European presence," said John Furth, who heads the New York office for the Frankfurt-based consultancy Roland Berger. Though they've still got a good roster of clients, "this doesn't solve the equity question," he said.

The companies also are aiming to galvanize as a major force in private banking, a Morgan stronghold that's grown sharply competitive in the New Economy years of fast, young wealth.

Together, the companies would manage $245 billion of assets for private clients, deepening their lead over companies such as Citibank, whose private bank has roughly $149 billion of assets under management, and Northern Trust, which reported about $92 billion at the end of last year.

In this area, the deal is not unlike some other headline mergers of the past year.

"It's another piece of a phenomenon that you've seen with Charles Schwab and U.S. Trust, where U.S. Trust has the services, but Charles Schwab has the client base," said David Palmer, a principal of the wealth management group at LoBue Associates, a Northbrook, Ill., consulting firm.

And, as with this summer's announced merger of PaineWebber and UBS AG, Chase and Morgan would broaden the band of high-net-worth clients they are most comfortable serving.

The two companies have been trying to expand the business on their own in the last few years. Morgan has been opening offices in cities with booming wealthy populations, like Palo Alto, Calif., and Atlanta, and it introduced a branding campaign this year aimed at younger clients with the tagline "J.P. Morgan works for me."

Chase recently reorganized its asset management and private banking group under Neal S. Garonzik, a vice chairman who joined the company just over a year ago and will leave as a result of the merger. Ramon de Oliveira, a senior Morgan executive, would run the business at the combined company.

For Chase, Morgan's private banking operation also comes with a lot of prestige and history, and some competitors are hoping the Chase name will dilute the Morgan brand.

The firms have approached the business slightly differently. Outside of Morgan Online, which targets the so-called mass affluent, Morgan's "generally suggested" minimum investment is $5 million. Chase does not pinpoint a minimum, but industry consultants say they tend to think of its minimum as around $3 million.

Peter Carroll, managing director at Oliver Wyman & Co., said that by growing their wholesale banking businesses, the two should be better able to tap into the cross-selling potential that nontraditional high-net-worth vendors like Goldman Sachs and Morgan Stanley Dean Witter have taken advantage of.

"I think Chase and J.P. Morgan, and Citi, for that matter, have some real opportunities to create more effective linkages between their private bank and their investment banking arm, and their commercial banking arm, for that matter," he said.