Lehman Brothers

"At that 1982 session, Joseph and the others drew up a list of the people who were the stars of the M& A world. It included Martin Siegel of Kidder, Peabody; Eric Gleacher of Lehman Brothers; Bruce Wasserstein of First Boston; Felix Rohatyn of Lazard Frères; Ira Harris of Salomon Brothers—and lawyers too, like Martin Lipton of Wachtell, Lipton, Rosen and Katz, and Joe Flom of Skadden, Arps, Meagher, Slate and Flom."

"As the Nobel Prize–winning chemist Louis Pasteur once observed, “Chance favors . . . the prepared mind,” and speaking of prepared minds, let’s conclude by looking at how the two remaining active outsider CEOs, Warren Buffett and John Malone, navigated the financial meltdown that followed the September 2008 collapse of Lehman Brothers. As you would expect, both pursued dramatically different courses from their peers’. At a time when virtually all of corporate America was sitting on the sidelines, shepherding cash, and nursing ailing balance sheets, these two lions in winter were actively on the prowl."

"At that 1982 session, Joseph and the others drew up a list of the people who were the stars of the M&A world. It included Martin Siegel of Kidder, Peabody; Eric Gleacher of Lehman Brothers; Bruce Wasserstein of First Boston; Felix Rohatyn of Lazard Frères; Ira Harris of Salomon Brothers—and lawyers too, like Martin Lipton of Wachtell, Lipton, Rosen and Katz, and Joe Flom of Skadden, Arps, Meagher, Slate and Flom."

"In fact, while the world was looking elsewhere, Koch Industries built a financial trading desk that rivaled anything operated by Goldman Sachs or Lehman Brothers. Koch Industries, known for crude oil and natural gas, became a world leader in making and trading some of the most complex financial instruments in the world. Koch’s trading business was a strategic"

"Koch Industries, an industrial conglomerate based in Kansas, seemed particularly unsuited to thrive in this environment. The company seemed confined to the business of making things and processing raw materials in complex, expensive facilities. A Koch engineer in Texas didn’t seem to have anything in common with a banker in New York. In fact, while the world was looking elsewhere, Koch Industries built a financial trading desk that rivaled anything operated by Goldman Sachs or Lehman Brothers. Koch Industries, known for crude oil and natural gas, became a world leader in making and trading some of the most complex financial instruments in the world. Koch’s trading business was a strategic centerpiece of the company’s growth strategy over the next decade. It was also the most striking example of Koch’s ability to amass and exploit information asymmetries, learning more than everyone else and turning huge profits from this advantage."

"Koch Industries, an industrial conglomerate based in Kansas, seemed particularly unsuited to thrive in this environment. The company seemed confined to the business of making things and processing raw materials in complex, expensive facilities. A Koch engineer in Texas didn’t seem to have anything in common with a banker in New York. In fact, while the world was looking elsewhere, Koch Industries built a financial trading desk that rivaled anything operated by Goldman Sachs or Lehman Brothers. Koch Industries, known for crude oil and natural gas, became a world leader in making and trading some of the most complex financial instruments in the world. Koch’s trading business was a strategic centerpiece of the company’s growth strategy over the next decade. It was also the most striking example of Koch’s ability to amass and exploit information asymmetries, learning more than everyone else and turning huge profits from this advantage."

"A word here about the company's farsighted arrangement, unique at the time, to gain maximum benefit from stock options as a lure for the best talent without diluting the stock of the shareholders. It came about partly by accident. In the agreement with Lehman Brothers, Tex had ear- marked a part of his personal stock to be used for the express purpose of inducements ( Tex held the largest and controlling share of stock, followed in order by Ash and Jamieson ap- proximately on a 2-1-1 basis ) . Thus Tex would be in a posi- tion to face any future criticism of stock options by share- holders (which has occurred as recently as 1966) by the unanswerable rebuttal that the shares involved were coming out of his own hide. And further, that since he was disposing of his own property in the best interests of the company, the details and terms of each transaction were nobody else's business. The advantages of such flexibility, he could also point out, in baiting the right hook for the right fish, were obvious when compared with the inflexibility of the custom- ary stock option plans which must meet the approval of shareholders."

"Five years after opening Keigetsu, various problems became apparent. Cost prices continued to rise, and the yen’s appreciation against the dollar became a strong headwind for imported goods from Japan. Due to the Lehman Shock in September 2008, restaurants, including neighboring ones, must have taken a big hit, but that didn’t mean cost prices decreased."

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

"Bob Greenhill of Morgan Stanley, the late Bruce Wasserstein of First Boston, the late Jim Glanville of Lehman Brothers, Marty Siegel of Kidder, Peabody—all would make celebrated, hard-driving deals, and fortunes for themselves and their firms."

"There was, however, one exception: a bank where employees were encouraged to put their bonuses into the company’s stock. This bank enjoyed the highest employee ownership ratio of any of the investment banks and the fortunes of its staff were directly linked to the risk decisions they took. Unfortunately for those employees, its name was Lehman Brothers."

"After the collapse of Northern Rock in August 2007 and subsequent concerns about other UK-based banks, what I had seen as a secure deposit base and a strength began to weaken. After the collapse of Lehman Brothers a year later, UK investors began a general run on bank deposits which was to pose jurisdictional questions in previously uncharted waters. Icesave became a problem because its UK deposits were held by a UK branch of Landsbanki, rather than by Heritable, which was a British bank wholly owned by Landsbanki. In hindsight, this was a major mistake by the management. I have to admit that, right up to the weekend of the collapse, I was unaware of such technicalities. It only started to dawn on me that this could be a difficulty when I spoke to the prime minister on 2 October. I can see it clearly now. Iceland is not a member of the EU, but an Icelandic bank had opened a branch in the UK, under EU regulation, and accepted deposits. So there was a jurisdictional issue – an issue that came to the fore over the weekend of 4–5 October 2008, as Iceland’s financial crisis unfolded."

"I took my chances and lost. I am not ashamed of that. I am also far from alone in the fallout of 2008. In private equity deals, what often happens is that managers are offered a share of the profits but are required to plough some of their savings into the deal as well. If people are willing to do that, they are genuinely aligned. That works well in the private equity model but somehow it is absent in the way the banks work. There was, however, one exception: a bank where employees were encouraged to put their bonuses into the company’s stock. This bank enjoyed the highest employee ownership ratio of any of the investment banks and the fortunes of its staff were directly linked to the risk decisions they took. Unfortunately for those employees, its name was Lehman Brothers."

"My vision was not coming together on the banking side, with analysts saying there wasn’t as much synergy in international telecoms as in pharmaceuticals, where you get real economies of scale. So I sold my Bulgarian and Czech telecoms investments within about ten months of each other. BTC was sold to the private equity arm of AIG, a US insurer, which popped out of the woodwork when I was expecting Greece Telecom, Deutsche Telekom or Turkish Telecom to buy it. Lehman Brothers advised us and AIG bought our 65 per cent stake for $855 million – far more than we were expecting. This sale wasn’t without complications either. Towards the end of the auction, I had lunch in London with Saad Hariri, the son of the late prime minister of Lebanon, and prime minister himself in 2009–11. He was the head of Oger Telecom, a Saudi/Lebanese company that owned Turkish Telecom, and he signalled that he was interested in buying BTC. I was keen and thought it would fit well with the group’s Turkish operations. Then AIG made a late bid and I was summoned to Bulgaria to see the prime minister. ‘We don’t want to sell to the Turks,’ he told me. ‘We want the Americans.’ I told him it was basically down to price, but the prime minister made it clear that I should bear in mind the time that might be needed to clear the deal, depending on who I chose. ‘Fine,’ I replied. And of course we sold to AIG. I have no regrets about that. We made almost €400 million profit on that deal."