CSFB to spin off buyout arm

DLJ Merchant Banking, the late-stage investment arm operating in North America and Europe, is preparing for independence from its investment banking parent Credit Suisse First Boston.

The group is one of three specialist fund management businesses to spin out as part of a strategic overhaul at the bank, CSFB’s parent Credit Suisse announced today in Zurich.

In addition to DLJ Merchant Banking, the Credit Opportunities and Diversified Credit funds are also being spun off.

The changes are expected to take until 2005 to complete.

DLJ Merchant Banking is currently raising its fourth fund dedicated to leveraged buyouts, which the group has been marketing for four months. Tom Dean, the unit’s current chief, will continue to head up the operation.

Bennett Goodman, another DLJ private equity veteran, is also set to leave the bank. Goodman, a highly regarded Wall Street protagonist, is expected to set up a hedge fund business.  

CSFB said the reasons for spinning off the buyout operation included a desire to take out potential conflicts of interest with other parts of its investment banking franchise, and to avoid competition with CSFB’s financial sponsor clients.

CSFB CEO Brady Dougan told investors that the buyout business, as well as the two debt funds that are being spun off, had “grown to the point where they are now competing with major clients of the firm”.

DLJ Merchant Banking is currently investing DLJ Merchant Banking Partners III, a 2001 vintage fund that has capital commitments of $5.3 billion.

Most recently, the group participated in a syndicate alongside JP Morgan Partners to acquire Northern Irish pharmaceuticals business Warner Chilcott for £1.615 billion (€2.3 billion; $3 billion).

DLJ Merchant Banking Partners is currently part of CSFB Private Equity. This unit also comprises mezzanine funds, a real estate business, secondary funds, a fund investment operation and a fund placement team, all of which are to remain part of CSFB.