Dealings

“James Ling’s LTV, an aerospace and steel giant, eventually went bankrupt. To my conservative mind, it made little business sense for a company to grow simply for the sake of growth.”

“Our plan was to grab Hartford in a “bear hug.” This is a common Wall Street carrot-and-stick approach: large blocks of stock are purchased from shareholders; and then this “carrot” is promptly followed with a decidedly more menacing offer to the board to purchase a controlling interest of the company’s shares at a price substantially over the market. It’s a carefully orchestrated technique: the attention-grabbing offer is made in a formal letter to the board, and next there’s an immediate public disclosure of the terms. Theoretically, the announcement that the target company is “in play” will result in a huge turnover of its stock. The biggest buyers will be professional traders, or arbitrageurs, and they will greedily pressure the board either to approve the deal or to search out a richer one. Under constant attack, and with the happy prospect that their own piles of stock as well as those of their shareholders will suddenly be worth incrementally more, the board will simply throw up its hands in pragmatic surrender, resigned to suffering through an unwanted but lucrative takeover. Or at least that was how our “bear hug” strategy played out in our hopeful minds.”

“First, at its core banking is not simply about profit, but about personal relationships. And second, the key aspect of any successful merger or acquisition lies in the ability of the new company to provide a beneficial service to its customers. The company has to deliver, or it must try harder until it does.”

“At its roots, the investment banker’s craft, I was beginning to learn, was very much a challenge to fit disparate pieces together. Completing the puzzle required not simply diligence and strategy, but at times an iron will. To make the deal, you had on occasion to be willing to shove square pegs into round holes. And so it was when I teamed up once again with my old friend from the back room of the Riverside Funeral parlor, Steve Ross. This time, Steve had set his sights on a much bigger prize—he was determined to conquer Hollywood.”

“Our entire “fortune” consisted of a handful of gas coupons and a few Kolynos toothpaste tubes that, as my mother had instructed, I had emptied and then carefully refilled with dozens of gold coins.”

“We drove on; the goal was now the port city of Marseille, and the new hope was a vague plan to board a ship to Casablanca. Following a road (of sorts) that weaved through a thick forest, we made our way toward Marseille with surprising speed. With the passing of each uneventful hour, our optimism grew. We became convinced that it would be only a matter of time before we were reunited with my stepfather and sailing on a ship to North Africa.”

“They would ship us east to the “internment” camps. I sat helplessly in the backseat, a twelve-year-old boy knowing that with each passing moment my family was moving inexorably closer toward its doom.”

“We continued on to Marseille. And once again fate intervened—our family was saved by a hero, Luiz Martins de Souza Dantas, the Brazilian ambassador to France.”

“simply because a soldier in Marseille had decided to smoke a cigarette, my Jewish family was alive, and free, and able to start life over again.”

“Success in business, as in life, is often largely just a matter of luck.”

“Founded in 1848 by two New Orleans cotton merchants originally from Alsace, Lazard Frères was one of several American investment firms with deep southern roots. As the commercial shipping trade moved to San Francisco, Lazard followed. Then at the turn of the century, additional offices were opened in New York, and next in Paris and London. It was the David-Weill family, descendants of the Lazards, who controlled the firm and, wisely, brought Meyer into its Paris branch in 1927. He quickly earned respect in European financial circles for his role in helping to guide Citroën, the French automobile giant, through the depression of the 1930s.”

“He did this, in part, through a network of carefully cultivated connections in business and government. His was an international circle that included President Lyndon Johnson of the United States; Jean Monnet, the father of the European Common Market; Gianni Agnelli, chairman of Fiat; Eugene Black, president of the World Bank; David Rockefeller, chairman of the Chase Manhattan Bank; General Lucius Clay, the mastermind of the Berlin airlift; David Sarnoff, the head of RCA; and Bill Paley, president of CBS.”

“Lazard—like Lehman Brothers, Kuhn Loeb, Dillion Read, and Goldman Sachs—was viewed as a Jewish firm.”

“standing in Mr.—throughout our decades together I would always address him as either “Mr.” or “monsieur”—Meyer’s office, meeting him for the first time, I immediately understood the rebuke in his question. After two months at the firm, I had received a raise to $50 a week. Yet I had not thought to write him a letter of thanks. This was not how “family” members were expected to behave.”

“When at last Mr. Meyer spoke, I learned I was wrong. I was not dismissed. Instead, he offered me the opportunity to go to Europe as part of a training program. “I realize you have other interests than finance,” Mr. Meyer said. Nevertheless, he suggested that I go work at several European firms associated with Lazard to learn the basics of the business. “When you return, then you can decide what you want to do in your life.””

“Samuel Montagu”

“Les Fils Dreyfus”

“In the aftermath of World War II, the European victors were, in essence, no less bankrupt than the vanquished. Trade was at a standstill and freely convertible currencies, other than the U.S. dollar and the Swiss franc, did not exist.”

“in the winter of 1950 I received my draft notice. A year earlier I had become, to my immense joy and pride, an American citizen. I had wrapped my Polish passport in a pink ribbon and sent it back to the Polish embassy. The Korean War had begun, and I considered it a privilege to serve in the army of my new homeland.”

“I had escaped a career-ending disaster to learn, instead, an important lesson: if a deal seems too good to be true, it is. It is often more prudent to walk away from seemingly glittering opportunities than to chase after them. As Mr. Meyer would lecture, a small profit is still a profit.”

“General David Sarnoff, the chairman of RCA. Two of the general’s cousins, Steve Ross and Eddie Rosenthal, wanted our help with an acquisition. Through their company Kinney National, the Rosenthal family owned funeral parlors as well as garages, parking lots, and building service concerns. As part of their funeral business, they also operated a fleet of limousines and were now hoping to acquire Avis Rent-A-Car. The fit, the Rosenthals were convinced, would be a logical one for Kinney.”

“Yet at his core he loved making deals, often, it seemed to me, simply for the pleasure of making them. His guideline, I decided, was the more complicated the deal, the better. From our initial meeting, I liked Steve enormously. For the next twenty-five years we would be friends and, on occasion, partners working together in enterprises that would change the shape and scope of American business.”

“Meanwhile, our ninety-day option was rapidly drawing to a close. Purchasing control of the company would cost us about $5 million. Petrie insisted that another $5 million would be needed to improve Avis’s deteriorating fleet of vehicles. Forty years ago $10 million was not an inconsiderable sum, particularly for a small investment bank with a stated capital of only $17 million. No less daunting, Avis had lost $1.2 million in 1961. Nevertheless, now that we had a management team ready to assume control—a team we had confidence in—we moved forward. Lazard exercised its option to acquire the Dumaine family stock.”

““No one ever got poor by taking profits””

“Harold Geneen,”

“Harold Geneen, the chairman of ITT.”

“help him. I advised him as ITT swooped in and, one after another, bought Canteen, Grinnell, Avis, Rayonnier, Levitt and Sons, Continental Baking, Scotts Seed, Pennsylvania Glass, and Airport Parking.”

“I urged Hal to purchase Hartford Fire Insurance. It was one of America’s oldest companies and, more significant, it had a strong, conservative, cash-heavy balance sheet. It would, I explained confidently, anchor the corporate strategy Geneen had been hoping to realize: its acquisition would make ITT an international conglomerate with a comfortable, financially sound balance between its U.S. assets and its foreign holdings.”

“George Brown, of Texas’s Brown and Root,”

“When the Nixon Watergate tapes were released, I was at last able to fill in some of the missing pieces of the story. On a Saturday in July 1977, in the back pages of the New York Times, a story appeared that quoted several of the newly released tapes. In one of them, Nixon tells Erlichman that he had never met Harold Geneen and had no interest in ITT. But nevertheless he was incensed over McLaren’s antitrust policies. He couldn’t tolerate his anti–big business bent.”

“Steve was in many ways an investment banker’s dream client—he was always looking for the next big deal. Even better, he was hugely imaginative, and when he set his mind to a particular challenge, he was totally—totally!—determined to achieve it. No less a gift was his knack for seeing the “next big thing.””

“In the three years since my aborted collaboration with Steve on the Avis deal, I had worked with his corporation, Kinney, as it began cautiously to dabble in the entertainment business. First, I had advised Kinney in its prescient acquisition of the National Periodical Publications, the owner of the comic strip “Superman.” At the time, buying a comic book franchise seemed more a whimsy than a business strategy, but Steve astutely appreciated the true strength of a superhero’s commercial potential. Next, I helped Kinney, in a corollary strategic move, acquire a talent agency, Ted Ashley’s Ashley Famous.”

“Following Steve’s instructions, Kinney had quietly begun a study of the motion picture and music industry. The aim was to identify a major entertainment target that Kinney could acquire. When the research was completed, Steve convened his team of advisers for a war council. The target, he announced with an air of triumph that struck me as precipitous, was Warner-Seven Arts.”

“Then there was Frank Sinatra. The singer not only owned a significant 20 percent of Warner Reprise records, but had— shrewdly? mysteriously?—obtained the right of veto on any sale of the parent company. Ratcheting up the difficulty of persuading Sinatra, his lawyer, Mickey Rudin, was not simply the singer’s representative in any negotiations but—shrewdly? mysteriously?—was entitled to receive 10 percent of whatever monies Sinatra received. Clearly, a deal would not be made unless Sinatra and Rudin were on board.”

“When he was done, Ted Ashley and I made the presentation of the Kinney offer. At first, our discussion was a litany of numbers, the dollars and cents we would pay for the stock, and the promising financial potential we saw in the studio’s future. This was a typical investment banker’s strategy: stick with us; we’ll make you rich, and then even richer. But, rather untypically, after I had waved the golden carrot, I proceeded to brandish a very sharp stick. I announced that we had taken it upon ourselves to alert the SEC to Commonwealth’s financial shenanigans. And, in another uncommonly aggressive tactic, we had also shared our analysis of the Commonwealth balance sheet with its large institutional shareholders. This was not the way we generally conducted business at Lazard, but the deal was not our usual sort of deal, nor were we up against the usual sort of principals. On behalf of our clients, we could, when it grew necessary, become fiercely pragmatic. Rozet was furious. As he stormed out of the meeting, he paused to shove his face directly up against mine and shout that he would sue me. But it was too late. I knew that Charles Allen and Bernie Cornfeld were too sophisticated and too practical to tie their futures—and capital!—up in a teetering corporation. They would have no choice but to negotiate the best deal they could with Kinney. Which, in short order, they did.”

“With ingenuity and perseverance, a banker could accomplish many great and transforming goals in the world of business. But in the wake of Steve’s death, I also learned perspective. What we bankers do is fleeting. The work of one generation can be carelessly undone by the next.”

“Hal had two rules. Rule 1: “Give me the facts. No guesses, no assumptions. Tell me what you’re sure of.””

“That left rule 2: “In a crisis, don’t wait for all the facts you would like. Get as many as you can, and then move. If you wait for all the facts, it will be too late.””

“However inadequate the information, however dangerous the consequences, I had to deal with the “facts” that I had.”

“In July, EDS had taken over du Pont’s data-processing operations. It was a contract that paid EDS an estimated $8 million annually, and du Pont had become the company’s largest customer. No less significant, its business with du Pont accounted for as much as $500 million of EDS’s highly leveraged market value and, therefore, a large chunk of Ross Perot’s personal fortune to boot. It was quickly apparent to me that EDS’s fortunes—and Perot’s—were intricately tied to the much shakier fortunes of F. I. du Pont. Now all I had to do was convince Ross Perot of this.”