Socgen: Growing One Little Bank At A Time

But is Cowen big enough to help the French giant in Europe?

Daniel Bouton, chief executive of France's Societe Generale, has no illusions about going head-to-head with the world's investment-banking goliaths. Instead, he aims to carve out global niches where his $365 billion bank can excel. "We're don't intend to compete globally [across all industries] with Merrill Lynch or Goldman Sachs," says Bouton.

The latest in a series of acquisitions, Bouton, 47, plans to spend $615 million to purchase Cowen & Co., a small Wall Street investment bank with a strong presence in technology and health care. The object: to take Cowen's underwriting and research expertise across the Atlantic. "As excited as we are about the U.S., we're even more excited about the opportunity to work with growth companies in Europe," says Curtis R. Welling, New York-based CEO of Societe Generale Securities Corp.

SIZE RULES. SocGen is not the first Eurobank to go shopping for smaller U.S. investment banks. Swiss Bank Corp., for example, bought Wall Street's Dillon Read & Co. But SBC then merged with Union Bank of Switzerland after concluding that in the increasingly competitive world of investment banking, size rules. Indeed, it's unclear whether the expected Cowen acquisition will give SocGen the strength Bouton seeks. To be sure, SocGen's equity has increased from $2.5 billion to $10 billion in the decade since it was privatized, and it has become France's most profitable bank. But it still lags in investment-banking rankings. In 1997, SocGen sagged to 9th place in completed mergers in France, behind No. 1 Goldman Sachs & Co., according to Securities Data Co.

SocGen's lagging position in global markets has prompted Bouton to snap up financial concerns in Europe and Asia, including the private banking business of London-based Hambros PLC, the asset-management business of the former Yamaichi Securities Co. in Japan, and two minor U.S. investment banks besides Cowen. If the Cowen deal goes through, SocGen will have spent more than $1.5 billion on acquisitions in the past 12 months. But analysts question whether this will be enough. "They are starting late and they don't have sufficient critical mass to begin with," says Mark Hoge, bank analyst at Credit Suisse First Boston.

Bouton is moving on other fronts. He is building a London-based fund-management business from scratch and hopes to reach his goal of $8.3 billion in assets by 2003. To do that, Bouton recently nabbed Nicola Horrick, formerly with Deutsche Morgan Grenfell, and John Richards from Fidelity to run the business. He plans to bid this month for Credit Industriel & Commercial, a lender the French government is selling. He won't rule out a merger with a big French competitor, such as Banque Nationale de Paris, Credit Lyonnais, or Paribas. That would create a French institution with an asset base roughly equal to Deutsche Bank. Bouton may have a niche strategy in global markets, but that isn't stopping him from thinking big.

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