LaBranche & Co., the largest specialist on the New York Stock Exchange, has survived a recent wave of consolidation on the Big Board by being an active acquirer, but now some observers think the 78-year-old firm could itself be a target.

The company makes markets for more than 500 stocks, from those of financial firms such as American Express Co., First Union Corp., M&T Bank Corp., Morgan Stanley Dean Witter & Co., Royal Bank of Scotland, U.S. Bancorp, and Wells Fargo & Co. to those of companies such as AT&T Corp. and Kraft Foods Inc. LaBranche accounts for 27% of the dollar and share volume traded on the exchange.

The specialist business is increasingly dominated by a handful of large firms, as low profit margins have prompted firms to build economies of scale and have forced consolidation. The result: Four firms, including LaBranche, make markets for about 1,780 of the 2,597 common stocks listed on the exchange.

“As business becomes more technology driven and the cost of executing trades goes down, it has to be a totally scaled business,” said Michael LaBranche, the chairman, chief executive officer, and president of the firm.

Much larger financial firms have scooped up several of LaBranche’s largest competitors in the past two years. Goldman Sachs Group acquired Spear, Leeds & Kellogg Specialists LLC at the end of 2000; Fleet Meehan Specialist Inc. is an amalgam of firms consolidated over the years and is now run as a unit of FleetBoston Financial Corp.; and Bear, Stearns & Co. Inc. and Hunter Partners LLC jointly own Wagner Stott Bear.

Meanwhile, LaBranche, a publicly traded company since August 1999, positioned itself as a consolidator, snapping up smaller specialists, including Henderson Brothers Holdings, Webco Securities Inc., and Robb Peck McCooey Financial Services Inc. It has a deal pending to acquire Bocklet & Co. LLC.

LaBranche might not be able to remain independent now that its primary competition comes from specialists owned by diversified financial institutions.

“Right now Michael is certainly king of the mountain, and deservedly so,” said Charlotte A. Chamberlain, an analyst at Jefferies & Co. Inc.

But an acquisition is not out of the question, analysts said.

The most obvious acquirers would be Citigroup Inc., Deutsche Bank AG, Morgan Stanley, or any of the big global players that do not already have a specialist firm on the floor of the NYSE, Ms. Chamberlain said.

LaBranche stock has been trading at about $28. The firm is scheduled to report second-quarter earnings on Monday and expects a range of between 26 cents and 30 cents per share. The consensus estimate is 28 cents, according to Thomson Financial Securities Data. Last year LaBranche had profits of 41 cents a share.

“I think you definitely have to go above the all-time-high [$52 a share] to get Michael’s interest,” Ms. Chamberlain said. If an offer of about $55 or $60 a share were to surface, LaBranche could be up for sale, she said. “At the right price, absolutely.”

Specialist firms are attractive acquisition targets for investment banks because their unique relationships with the corporations they represent on the NYSE opens doors to top management — a step toward generating additional investment banking business.

“Trading a company’s securities on the New York Stock Exchange is one of the few ways investment banks can get up front and personal with decision makers,” Ms. Chamberlain said.

Mr. LaBranche said that his firm focuses on customer service. “The ongoing viability of our business is largely … due to the relationship between the specialist and issuers,” he said. Ultimately, how good a job you do is based on the relationships with the companies and information you provide them, he said.

He declined to discuss the possibility of the firm being an acquisition target.

“It is likely that at some point management would sell the franchise to some large investment bank or combination investment bank and broker,” said Robert P. Napoli, an analyst at ABN Amro.

In the meantime LaBranche will probably grow organically and make small acquisitions, Mr. Napoli said. “They are certainly in no need of selling the business.”

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