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A new union When North Carolina-based M&A boutique Bowles Hollowell Connor announced it would be acquired by commercial bank First Union in the spring of 1998, much interest focused on one of the firm?s name founders, former White House Chief of Staff Erskine Bowles. Was the firm's acquisition only interesting because of the White House connection? Far from it. Bowles Hollowell Connor, or BHC, is a leader in mid-sized M&A advisory -- the firm is the national leader in sell-side transactions (advising acquisition targets) for deals under $100 million. BHC specializes in M&A advice and financing for companies with annual revenues between $30 million and $500 million. Since 1992, the firm has advised on more than 250 deals worth more than $23 billion; in 1997, the firm participated in 16 M&A transactions worth a total of $2.5 billion. And while BHC was indeed co-founded by Erskine Bowles in 1975, Bowles has sold his stake and is no longer affiliated with the company. Increasing aggression With its reported $90 million acquisition by First Union, BHC is moving further away from its roots as a closely-held shop. North Carolina-based First Union has in recent years aggressively expanded both its commercial and investment banking capabilities. Several months before announcing the BHC deal, First Union acquired Richmond-based boutique Wheat First Butcher Singer, which brought M&A, retail brokerage, and equity underwriting to the growing First Union table. First Union execs believe that the acquisition of BHC is an especially good fit because of First Union's own concentration on middle-market business. In announcing the merger, bank officials said that BHC will continue to be headed by CEO Steve Cummings. The firm operates under the same name, as a division of First Union Capital Markets. Recent deals have included the sale of a majority stake in defense electronics contractor Condor Systems for $134 million in April 1999, and the search for a buyer for an automotive parts divisions of Eaton Corp. In large part because of its focus on middle-market companies, BHC has a strong presence among private equity groups, which invest directly in leveraged buyouts and recapitalizations of private companies. BHC reports that it has strong relationships with more than 300 of these groups, and has represented more than 75 of them in the last five years.
BHC hires undergraduates into a two-year analyst program, recruiting primarily from strong Southern schools such as Vanderbilt, University of Virginia and Duke. The firm lists the schools at which it recruits, along with contacts, at its web site, located at www.bhc-co.com. BHC's recruiting of MBAs for associate-level positions is more widespread -- the firm journeys to non-Southern institutions Harvard, Kellogg and the University of Chicago. Reports one insider: "Because Bowles is a strong place culturally, fit is important. [The interview] is certainly not [on the level of] 'How 'bout this weather outside,' but as I remember, you're not doing a lot of bond math in the interview." One insider describes his interview process. "It was two-on-ones first round." During the callback round, candidates "come in for dinner on Friday night. There's a lot of analysts and associates there, then you go out, but it's not one of these super high-pressure deals where you have go and get hammered." On Saturday, "you start at about 8:30 and have five or six interviews, and close with a two-on-two lunch with two recruits, a senior banker and a junior banker."
Basketball with partners Insiders agree that one of the best things about working at Bowles is the contact between senior and junior bankers. "[At BHC] there's not a very hierarchical structure -- they definitely don't lead you by fear or anything," says one insider. "It's very much a place where you're able to build very good relationships from top to bottom." Says a former analyst: "The senior people cared enough about you as a person to talk to you on a personal basis at work. They knew something about you other than that you showed up with a model for them." While the composition of "the deal team's no different--managing director, VP, associate and analyst--the managing directors [at BHC] are so cool about your professional development and being friendly. The door's always open," says one insider. "I've spent an inordinate amount of time in partners offices, talking about deals and whatever." The cozy relationships between senior and junior bankers are not confined to the office, it seems. "We'd have Tuesday night basketball, where the firm would just rent the gym out, and the analysts would come out," one former analyst says. "The partners at the firm would come out and play, not every time, but reasonably regularly." And the senior bankers apparently are willing to extend the relationship beyond the job. "They have always been pretty supportive, they're great at placing analyst people in positions with private equity firms. They're well known in that circle, and pretty highly thought of. It tends to be a pretty good launching pad for those jobs." Sums up that contact: "The senior guys are very good about giving a damn about what happens to the analysts." Slightly lower on hours, pay "They're pretty good about no face-time, because you do work a lot when you're busy. At the top it can be as busy as Wall Street," reports one insider. Still, that contact says that, on average, the workweek at Bowles is shorter than on Wall Street. "The average week is, not 80, maybe 70 hours a week." Notes that contact: "There's an appreciable difference between 70 and 80 -- that's two hours every night past midnight that you have to work. Those hours are much more valuable, the last 10." BHC insiders acknowledge that with shorter hours comes a tradeoff in pay. "I think in absolute terms [pay] is lower. In the past from an analyst perspective, [pay] was a little off-market. For example, Bowles Holowell were not paid as much as NationsBank in the past," says one insider. However, that contact reports that "on the associate level, [salaries are] pretty comparable--they attract some pretty stellar candidates from all over." "The comp is pretty comparable all the way out. The blowout Wall Street numbers are probably not likely to be there, but you're well in the upper-half levels," remarks one insider. "And with the cost of living, I mean, multiply it by three." That contact raves about the affordability of North Carolina. "You can go buy a four-bedroom house in the nicest place of town for $350,000 -- you have a mortgage of $18,000 bucks. You've got a house and not a shoebox. You can barely get a nice one bedroom in New York for that." When Bowles bankers leave home, it's not necessarily to a chi-chi area, either, because of Bowles' focus on middle-market companies. "The travel's OK," reports one insider. "Sometimes you're at a place where there isn't a decent place to stay, and you just make do. That might be if you were selling the company, and you have to take the buyer to a plant." That contact continues: "But typically you're in a town or city where there's a decent place to stay. It's not like you're in mobile home parks." The First Union Merger "From a culture point of view, so far, it's had pretty low impact," says one insider about the acquisition of BHC by First Union. "Bowles had already moved into a new offices that are in the NationsBank building, and I think right now, there's no plan to move them in the near future. It's very much operating independently." This independence is symbolized by other factors other than the separate locations: "Bowles hasn't taken its name off the letterhead, and they're still recruiting on their own." Insiders say that business reasons underly the firm's maintenance of independence. "Bowles brings something that First Union simply didn't have," says one banker. That contact contrasts the Bowles/First Union situation with recent combinations that have resulted in some infighting: "No one's fighting over who's going to do M&A at First Union. They know that Bowles is going to do the M&A." And it's not as if Bowles gets nothing out of the deal, either. "There was just not much chance of doing technology at Bowles Hollowell," explains one insider. "Now they're not going to be a huge player, but they can build some industry groups where First Union is established." One insider describes the initial reaction to the merger: "I think the junior people kind of looked at it and said, 'Oh shit, what does this mean for me.' But they're all on board. Most of the senior people are pretty rooted there, and the junior people know they wouldn?t do something that they didn't think would work." Going from a private partnership to a subsidiary of a public one does have some changes, insiders concede. "At the end of the rainbow there's not partnership as the goal, so you don't have the opportunity to sell out Bowles. But at the same time, with things the way they are [with consolidation in the financial services industry], if you were to have joined now, you're rolling the dice that it wasn't going to be sold [before getting a chance to make partner]. And comp-wise, there's a lot of incentives First Union can give -- stock options, stock discounts -- that Bowles couldn't."
Human Resources 101 South Tryon Street1 40th Floor Charlotte NC 28280
Mergers and acquisitions advisory
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