Drexel Burnham Lambert

Strategic Concepts & Mechanics

Competitive AdvantageTax Arbitrage as Structural Weapon Operating PrincipleProfessional Manager Decay Across Generations Risk DoctrineNever Cut Back a Committed Deal Signature MoveMilken: Four-Thirty AM Cathedral-Builder With No Office Capital StrategyVenture Capital Masquerading as Debt Signature MovePeltz: Spittle-on-the-Check Persistence from Near-Broke Signature MovePerelman: Borrowed $1.9M to a Boeing 727 in Seven Years Cornerstone MoveManufactured Credibility from Thin Air Decision FrameworkContra-Thinking as Default Mental Operating System Identity & CultureForced Savings as Loyalty Handcuffs Cornerstone MoveCash Flow Over Earnings as the Only Truth Cornerstone MoveBuy the Core, Sell the Pieces, Erase the Debt Signature MoveKingsley: Mount Everest Desk, Twenty-Year Sounding Board Signature MoveIcahn: Wrestling-a-Ghost Negotiation Until the Last Penny Cornerstone MoveOwner's Equity as the Non-Negotiable Discipline Signature MovePerot: Obscene Demands Until They Stop Saying No Signature MoveBuffett: Insurance Float as a Super Margin Account Signature MoveHuizenga: Close in the Stench Until They Say Yes Cornerstone MoveSteal the Playbook, Then Outrun the Author Risk DoctrineLuck Acknowledged Then Ruthlessly Exploited Identity & CultureJoy in the Chase Not the Prize Capital StrategyHold Your Equity Until It Compounds Past Nine Figures Identity & CultureThick Skin Inherited or Forged by Fire Cornerstone MoveConsolidate Fragmented Industries at Blitzkrieg Speed Cornerstone MoveNobody Got Rich Watching from the Stands Strategic PatternHigh-Growth Industry as the Only On-Ramp Capital StrategyInsurance Float as Empire Foundation Signature MoveKerkorian: Sell Before the Peak, Never Pick the Bone Clean Relationship LeveragePolitical Access as Wealth Multiplier Not Wealth Creator Cornerstone MoveKeep the Back Door Open on Every Bet Operating PrincipleFrugality as Permanent Competitive Moat Signature MoveWalton: Spy on Every Competitor Then Outwork Them All Signature MoveRockefeller: Silent Desk, Then Swivel-Chair Knockout Risk DoctrineNo Cross-Pledging of Crown Jewels Signature MoveDeals Hated, Strategy Loved Signature MoveNever Run Out of Cheque-Writing Time Relationship LeverageShare the Pie to Keep the Table Strategic PatternEcho Bay Model Then Surpass It Signature MoveKlosters Mountain as Strategic War Room Identity & CultureRefugee Hunger as Permanent Engine Cornerstone MoveWritten Memo Then Unanimous Sign-Off Identity & CultureReturn to Canada Only With Success Cornerstone MoveBuy Producing Assets at Cycle Bottom, Never Explore Signature MoveTrust Mining Operators Then Stay Away Operating PrincipleFocus as Compensation for Ordinary Talent Cornerstone MoveBorrow Against the Asset to Buy the Asset Decision FrameworkGeopolitical Disruption as Buy Signal Strategic PatternScarcity Premium as Entry Signal Signature MoveControl Without Majority Ownership Strategic PatternFlanking Around Entrenched Giants Identity & CultureLoyalty Bought with Friday Paychecks Relationship LeverageBoard Seats as Reconnaissance Posts Cornerstone MoveSell the Company to Itself — Internal Reverse Takeovers Competitive AdvantageClassified Stock as Control Multiplier Cornerstone MoveFind the Key Man and Close Before Combat Operating PrincipleCash Business Preference from Bus Roots Strategic PatternConcentrated Diversity Over Grab-Bag Portfolios Signature MoveWin Small, Consolidate, Then Leap Geometrically Signature MoveWallpaper-Roll Planning Then Relentless Pressure Cornerstone MoveBuy Cheap Shells, Strip and Reload the Portfolio Operating PrinciplePool-of-Light Negotiation Theater Relationship LeveragePolitical Access Without Political Office Signature MoveDebt as Temporary Tool, Never Permanent Foundation Capital StrategyDividends as Upward Cash Escalator Signature MoveChief of Staff Handles Architecture, Boss Handles Vision Decision FrameworkAcquire Capacity, Never Build in Inflation Signature MovePocket the Stake, Play with Winnings Only Cornerstone MoveEquity Stakes for Distribution Leverage Competitive AdvantageCableLabs Royalty-Free Standards Play Cornerstone MoveStock Architecture to Lock Control Competitive AdvantageBlackout as Franchise Leverage Capital StrategyTax-Sheltered Growing Annuity Capital StrategyInsurance Company Capital Over Banks Signature MoveNever Bet the Whole Farm Strategic PatternWarrants as Industry Coordination Currency Decision FrameworkEmpathy as Negotiation Architecture Signature MoveThrow the Keys on the Table Signature MoveOwn a Small Piece of a Winner You Can't Run Operating PrincipleDecentralized Cowboys with Centralized Benchmarks Risk DoctrineWhat If Not as Decision Filter Strategic PatternScale Economics as Survival Doctrine Signature MoveAsk One Sharp Question to Crack Open Intel Signature MoveCash Flow Not Earnings as Currency Cornerstone MoveBuy the System, Pay With Its Own Cash Flow Identity & CultureIntrovert's Edge Through Listening Signature MoveComplexity as Strategic Protection Signature MoveQuality First Spending Philosophy Strategic PatternRegulatory Capture Through Service Cornerstone MoveBack Door Contract Engineering Signature MoveUltra-Delegated Management Style Capital StrategyDebt as Growth Accelerant Relationship LeveragePartnership Through Shared Experience Identity & CultureVirtual Executive Presence Relationship LeverageSilence as Information Weapon Signature MoveFuture-Focused Hiring Standards Cornerstone MoveLeveraged Cash Flow Growth Spirals Signature MoveAnthropological Customer Vision Competitive AdvantageGuerrilla Strategy Against Incumbents

Primary Evidence

"The banks were lenders in many of Drexel’s deals, but their loans were generally short-term and secured. Without Drexel to place the unsecured, subordinated debt, these deals would never have happened. And while other investment banking firms now were eager to play Drexel’s part, the megadeals spawned securities—junk bonds—in amounts that no investment-banking firm but Drexel could sell."

Source:Predator's Ball

"Under the terms of his LBO loans, Kluge was required to break up Metromedia and sell off the pieces to liquidate the debt in short order. It quickly became apparent, however, that it would not be feasible to peddle the assets quickly at premium prices. The problem was partly that poten¬ tial acquirers were constrained by Federal Communications Commission (FCC) limits on the number of stations they could own. Faced with pos¬ sible default on his loans, Kluge turned to the investment bank Drexel Burnham Lambert for a new financing package that granted him addi¬ tional time to complete the asset sales."

Source:How to Be a Billionaire : Proven Strategies From the Titans of Wealth

"The goal would be to convert 100 of these to minimarts and give a general facelift to all retail locations. The team wasted no time in getting into action. Then, in July, Peter Munk negotiated refinancing of Clark Oil, by raising $300 million selling first-mortgage notes through Drexel Burnham Lambert, a major New York financial house."

Source:The Golden Phoenix : A Biography of Peter Munk

"The rest of the year was spent consolidating the new Power Fi¬ nancial and getting its North American subsidiaries to work together, selling each others’ services where legally permitted. Another task was setting up the infrastructure for co-operation of Power Financial’s North American units, where it was practical and legally permitted, with Pargesa and its global financial-services subsidiaries, including Groupe Bruxelles Lambert and its New York investment house sub¬ sidiary, Drexel Burnham Lambert."

Source:Rising to Power - Paul Desmarais & Power Corporation

"When we were at our limit with our usual suspects of lending, we turned to still more alternative means of financing. One of those was a controversial financier named Michael Milken, who was known for creating a new market for high-yield “junk” bonds. The rise of Milken and the firm Drexel Burnham Lambert created a revolution in deal financing for us. Their agility to buy and price offerings dramatically changed the acquisition game—and saved me incalculable hours in front of clients on road shows. We knew what level of debt and the terms that were available if we had Drexel on our team."

Source:Born to Be Wired

"McCaw's goal, as always, was to preserve his independence, flexi- bility, and control. Although he had qualified for the MCI deal on the basis of Affiliated's balance sheet, McCaw ultimately decided to go with a different form of financing, perhaps to show a measure of indepen- dence from his Boston associates. He went with junk bonds, a relatively new form of corporate IOUs at high interest rates, recently popularized by an already legendary trader at Drexel Burnham Lambert named Michael Milken."

Source:Money From Thin Air - The Story of Craig McCaw

Appears In Volumes

Predator's Ball How to Be a Billionaire : Proven Strategies From the Titans of Wealth The Golden Phoenix : A Biography of Peter Munk Rising to Power - Paul Desmarais & Power Corporation Born to Be Wired Money From Thin Air - The Story of Craig McCaw