M&A … and Bruce

by Laurence Grafstein | October 15, 2009

It's safe to say there are not too many investment banking chieftains whose idea of a compliment was to tell you after a meeting that "you showed a certain amount of fingerspitzengefuhl in there." To which the appropriate response was, "Only a certain amount?" Followed by the inevitable rejoinder: "But were you effective?" Bruce Wasserstein, who died this week at 61, loved complexity and was a genuinely complex man himself. Like many of his former colleagues, clients, and competitors, I'll be trying to figure him out for years. And I'm looking over my shoulder, expecting his editorial comments any minute now.

For 15 of the last 20 years, off and on, I had a chance to work with Bruce (no one referred to him by his last name) and, well, negotiate with him. Not just about every aspect of professional life, but about such mundane issues as where to eat and when to leave for a meeting and whether to meet at the elevator or downstairs and whether to call to say you might be running late. This could be quite exhausting. He had a remarkable ability to get his way, even among the headstrong and rather self-important bankers and lawyers who make up the mergers and acquisitions community. After a while, you just began to cave. But then he wouldn't allow you to capitulate, so the negotiation cycle would begin anew.

Bruce had a love of media from his days on the University of Michigan student paper to his recent proprietorship of The American Lawyer, The Deal, and New York magazine, which helps explain why his son Ben was such a talented online editor here at TNR. Bruce's dalliances with self-promotion--his desire to create and control his personal narrative--sometimes got him into trouble because our celebrity-driven culture of journalism revels in cutting down those whom it has built up. Even he could not flawlessly negotiate his image management with the entire global press. But beneath the spin and the occasional controversy lay a substantive personal history of innovation in mergers and acquisitions, which makes his contribution an important piece of the economic history of the past quarter century. In a people business, Bruce (who was quite shy personally despite his aggressive persona) took a cerebral, intellectual approach to advising companies.

What was this innovation and why did it matter? Together with his longtime partner Joe Perella, Bruce understood that the combination of steady deregulation, globalization, and generous capital markets conditions had radical Darwinian implications for publicly traded corporations. Whereas the merger boom of the 1970s was driven by the notion that diversification and use of equity on the part of conglomerates created value, the disintermediation of traditional banking and the growth of bond markets turned that on its head. Public corporations needed to focus their business lines and restructure their portfolios. The problem was that this could not be done easily overnight and not every management team was ready for the accelerating pace of change. For every General Electric there was a General Motors. So M&A became a necessary strategic tool both to advance corporate objectives and facilitate the movement of assets to their highest valued user (to use the neoclassical lingo of the Chicago school). And the corollary was that the effective use of M&A techniques could differentiate certain companies from others in an age where shareholder value maximization ruled. Bruce broke new ground--and broke some glass--by bringing creative but unfamiliar tactics into the boardrooms of corporate America. This in turn added to the stock market's rocket fuel and reinforced the apparently benign Age of Equities. Eventually corporations, like most of Bruce's counterparties, capitulated. M&A is now an integral part of the business landscape, for better or worse.

My years at Wasserstein Perella and Lazard (or Wasserstein Not Perella, as some dubbed it) have given me a fair bit of material for what Disraeli would call my anecdotage. Bruce had a good sense of humor. After one particularly unsuccessful marketing session with a Silicon Valley CEO, the two of us, along with my partner Paul Haigney, started to recall our worst business meetings ever. There were lots of candidates. But Bruce's favorite was the time he was running late and his assistant told him he needed to get to his conference room right away to meet the finance minister of Slovakia.

Arriving well behind schedule, Bruce proceeded to launch into a distinctive, long-winded Wassersteinian monologue about all of the different issues facing Slovakia's privatization program, corporate sector, and politics generally given its recent separation from the Czech Republic. And why, of course, Slovakia needed a banker like Bruce to steer it forward. The guests and his colleagues tried unsuccessfully to interrupt several times. Finally, the finance minister said, "Excuse me, Mr. Wasserstein. We are not from Slovakia. We are from Slovenia." The way Bruce told it, the room went silent, with ashen faces around the table. After a brief pause, Bruce--always a bit faster and more confident than most of us--answered: "And that's precisely your strategic dilemma." What was the poor Slovenian finance minister to do, other than cave?

Laurence Grafstein, Chairman of The New Republic Advisory Board, is managing director and head of M & A at Rothschild in New York.

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