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GE Capital: GE Capital marches on Europe

GE Capital Services earns 37% of General Electric's profits, so it's anything but strategically insignificant. Right now its generals are engaged in a big push in Europe - it's taken over 34 businesses in two years. The strategy is to revive run-down assets by reshaping them with the company's "non-bank bank" formula. But purchases of traditional banks in eastern Europe are unnerving analysts. Can GECS be as successful with these as with British and French acquisitions? Brian Caplen reports.

When a British investment house decided to unload an ill-fitting credit business, it drew up a list of preferred buyers including a UK clearer and a Dutch bank. Deliberately left out of the bidding was GE Capital Services (GECS), the finance arm of General Electric, the world's largest company, which is keenly interested in vendor financing and had been trying to acquire the business, Pallas Group, for several years.

"We were not on the list because we have a reputation for buying cheap and tying our contract parties up in knots," says Christopher Mackenzie, president of GE Capital Europe.

But the fact that a seller either doesn't want to part with an asset or prefers to do a deal with someone else is not the kind of detail to prevent GECS from making an acquisition.

Mackenzie's business development team had already researched UK vendor financing and knew that Pallas, with high-profile clients including British Telecom, Minolta, Toshiba Information Systems and Sun Microsystems, was the asset it wanted. Vendor financing - which enables manufacturers to offer credit to wholesalers - is one of GECS' core activities and Mackenzie had been trying for some time to convince Pallas's parent company, SG Warburg, that GECS was the natural owner of the business.

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