Second Tier No More: $11.5 Billion Deal Catapults DLJ, CS First Boston

Updated from 8/29/00

Credit Suisse First Boston's decision to buy Donaldson Lufkin and Jenrette (DLJ Quote) has a timeless rationale -- size. DLJ needs to get big and CS First Boston needs to get bigger.

The investment banking business is largely dominated by the top tier, Goldman Sachs (GS Quote), Morgan Stanley Dean Witter (MWD Quote), Citigroup's (C Quote) Salomon Smith Barney and Merrill Lynch (MER Quote). So firms in the second-tier need to break into the top tier to avoid losing business to the Big Four.

That fact wasn't lost on the market, which bid up DLJ's shares 28% to $84 Tuesday on reports of a deal. Credit Suisse agreed Wednesday morning to pay $90 a share, or $11.5 billion, putting it on par with the 18 times estimated 2000 earnings that UBS (UBS Quote) agreed to pay for PaineWebber (PWJ Quote) in July. ...