While many banks that enter the U.S. merger advisory business are plagued by culture clashes, France's Societe Generale is confident it can avoid that problem.
Societe Generale this week announced plans to buy Barr Devlin, a New York utilities merger advisory boutique. According to the head of the SG Americas utilities division, his relationship with Barr Devlin's bankers goes back about 20 years.
Societe Generale referred its client, Pacific Gas & Electric, to Barr Devlin when the utility company needed an adviser on its $1.5 billion deal for New England Electric System last year, said Jacob Worenklein, the utilities chief.
That kind of close relationship, coupled with Barr Devlin's quick rise up the utilities M&A league table, spurred Mr. Worenklein to approach Barr Devlin about doing a deal. The fact that Barr Devlin's partners are "complete gentlemen" was also a factor, Mr. Worenklein added.
Societe Generale's deal for Barr Devlin, which was founded by four Morgan Stanley & Co. veterans in 1990, comes as the U.S. utilities industry is in an intense consolidation phase. It is part of a larger plan by Societe Generale, France's largest privatized bank, with $340 billion of assets, to compete in the United States by focusing on specific industries, such as media, gambling, and finance.
"The future of competition in the banking industry is not going to be based on size or geography but on the ability to provide good strategic advice to businesses," said Curtis Welling, president and chief executive of SG Securities Corp., the investment banking arm of SG Americas.
To that end, SG Americas last year entered into a joint venture with Beverly Hills-based Bannon & Co. to focus on the entertainment and communications industry. But Barr Devlin would be the Paris bank's first acquisition of an American company.
Barr Devlin executives say they were attracted to Societe Generale because of its large balance sheet and global reach. "If things had stood still in 1995, we would have either added people or built capabilities from within," said John Barr. But Barr Devlin dropped in 1997 to No. 13 from No. 3 among utilities M&A advisers. However, Mr. Barr said, a couple of deals the firm worked on last year have yet to be announced.
Barr Devlin, which has never done an international deal, is now looking at Latin America as a possible first step offshore. Executives at both Barr Devlin and Societe Generale say the global trend toward privatization of publicly held utilities will offer the perfect outlet for exercise of their combined strengths.
The acquisition, which is expected to be completed in February, will create a new unit of SG Americas, called SG Barr Devlin. It will have a larger staff than Barr Devlin's current 14.
