EXCLUSIVE: Veteran Bank Merger Specialist May Join Merrill

Veteran investment banker Dick Barrett, noted for his work on bank mergers, is giving up on his effort to raise a private equity fund and is in talks with Merrill Lynch(MER) about assuming a high-level position there.

A source close to Merrill confirms Barrett and longtime business partner Mark Ellman are in talks with the investment bank, but says if they joined the firm they would have no managerial responsibilities. Instead, they would focus on courting Merrill's top corporate clients in the financial services industry.

While Barrett is cagey about whether he is looking to return to investment banking, he tells TheStreet.com he and his partners are abandoning their private equity venture, Barrett, Ellman and Stoddard Capital Partners (BESCAP).

"We've basically wound up our operations," he says. "We were not able to raise a fund of a size that we felt was adequate in the current environment."

Bankers familiar with BESCAP's plans tell TheStreet.com it was targeting $500 million for the fund, which would have invested in financial companies, but Barrett would not stay on the phone long enough to answer many questions. It is widely understood to be difficult to raise a private equity fund without an investment track record.

Barrett says it is "highly improbable" he will go to Merrill and he will not confirm that he has had talks with executives there about a possible position.

The potential move back into investment banking for Barrett and Ellman comes at a time of rapid consolidation in the financial sector, as banks grapple with liquidity issues and flagging stock prices. One financial institutions advisor at a Merrill rival says Barrett might be handy to have around if Merrill does sell itself, as many believe it will. However, Merrill President and COO Greg Fleming and global origination head Andrea Orcel are also experienced hands at bank mergers. The source close to Merrill also says the firm's expertise is more than sufficient if it should decide to sell itself.