THE LAST PARTNERSHIPS Inside the Great Wall Street Money Dynasties phần 10 docx

missions in 1975. Goldman Sachs suffered a serious blow when Levy

died in 1976, putting it under another cloud. The firm, which had

been ruled by a single, authoritarian managing partner, now clearly

needed leadership in order to survive. The two candidates for the top

job, John Whitehead and John Weinberg, could either vie for the job

in typical Wall Street fashion until the stronger of the two emerged, or

they could reach an accommodation. Fortunately for Goldman, they

chose the latter route. While Goldman would ease into this transition

successfully, another old-line firm was in the throes of change as well.

Resurgence at Lazard Freres

The merger trend of the 1960s helped many new and established

investment banks to leave an indelible mark upon Wall Street and

corporate America. While Goldman Sachs found itself on the side of

the takeover targets, another old established bank resurrected its

name on Wall Street by adeptly assisting takeovers on the buyers’

side. Prior to that time, the firm’s name was known on the Street, but

it was certainly not the fixture that many other Our Crowd firms had

become. In fact, it did not belong to any crowd at all but remained

something of an outsider despite its long-established origins.

Lazard Freres was established in 1848 in New Orleans. Three

brothers, Alexandre, Lazare, and Simon Lazard, emigrated from

France to New Orleans in 1848 and established a dry goods business

with $3,000 each. The following year they were forced to close shop

when a devastating fire engulfed the city. They moved the company to

San Francisco to set up a similar business and were fortunate enough

to arrive just as the gold rush began. They soon began trading in gold

rather than dry goods, and within the short span of only four years

since their arrival in the United States had opened a Paris operation

called Lazard Freres et Cie. As the American Civil War was ending,

they became full-fledged bankers who specialized in gold trading. In

1877, the brothers opened a London house called Lazard Brothers,

which quickly became an accepting house recognized by the Bank

of England, meaning that it was authorized to clear payments and

deal in trade bills (commercial paper in the United States). A relative

who was hired to be an accountant in the San Francisco operation,

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Alexandre Weill, opened a Wall Street office in 1880 known as Lazard

Freres & Co. In the breathtaking period of only forty years, Lazard

had become the largest dealer in gold between the United States and

Europe and a respected bank recognized by both the Banque de

France and the Bank of England.

Despite its unique success and wide international connections,

Lazard Freres remained a minor house on Wall Street. A presence in

New York was necessary, because the firm had access to a wide array

of foreign investors upon whom the markets depended in the nine￾teenth century for their buying power. Of all the private banks on Wall

Street, Lazard was the most private in the years leading to World War

II. Its name was known on the Street but virtually nowhere else in the

country, although it was much better known in Paris and London. Its

role as a financial adviser was respected, although its activities in

underwriting were much less publicized. In the 1930s, Lazard man￾aged about $190 million in new issues, ranking it about the same as

Salomon Brothers & Hutzler and Drexel.9 By the early 1940s, changes

had occurred at Lazard in New York that would pull the firm into the

limelight after years of a demure private banking presence.

The firm’s far-flung organization made it one of the first invest￾ment banking houses to become truly international. Yet it was not the

international characteristics that made it a presence on Wall Street in

the 1950s and 1960s but anti-Semitism in Europe. During the Second

World War, one of its investment bankers from Paris immigrated to

New York. Andre Meyer’s arrival at Lazard Freres in New York

marked a distinct turn in the fortunes of the very private organization

that would equate its name with the mergers and acquisitions trend

that would begin in the 1950s and continue until the early 1970s.

After Meyer landed in New York, Lazard would become the prime

investment banker in one of the most ambitious strategies of empire

building during the conglomerate era.

Meyer became one of the most famous bankers of the postwar gen￾eration on Wall Street. His reputation derived from his ability to put

together deals on a scale not seen since the days of J. P. Morgan and,

later, Clarence Dillon. At the same time, he acquired a reputation for

being the most loathed man on the Street by his employees and com￾petitors. In short, he was a man who inspired strong feelings among

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friends and enemies alike. Meyer was born in 1898 in Paris, the son of

a French printing salesman. An apathetic student, he took a job at a

small French bank while still a teenager. While France was in the

midst of the First World War, Meyer was able to learn a vast amount

about French banking since so many of the bank’s employees were

serving in the military. Trading quickly became his preoccupation at

the bank, and he acquired a reputation for possessing a quick mind

for the intricacies of commercial IOUs and foreign exchange. In a

country where bankers usually passed their profession to their sons,

Meyer soon became an exception. In 1925, at the age of twenty￾seven, he was offered a position at Lazard Freres by David David￾Weill, the son of Alexandre, one of the founders. He accepted and

was made a partner within a year. His penchant for trading won him

wide notice in the Paris market, and he was already established

despite a formal education and no family bloodlines to his credit.

But Meyer’s reputation was not fully established yet. Ironically, his

first deal of note would be for an ambitious French company with an

American twist. Lazard was a major shareholder in the French auto￾mobile manufacturer Citroën, founded by Andre Citroën. The com￾pany was in the midst of taking the French market by storm, producing

cars on a large scale and selling them on credit—two innovations bor￾rowed from American car companies. The finance arm of Citroën was

Societé pour la Vente a Credit d’Automobiles, or SOVAC. Citroën

needed more money for his ambitious expansion plans, and Meyer rec￾ognized an opportunity. He proposed that Lazard buy the finance com￾pany and expand it into other areas of consumer financing as well, while

still agreeing to finance Citroën. In short, he was helping create one of

the first consumer credit companies. Citroën agreed. Other partners in

the venture included two American companies, Commercial Invest￾ment Trust and J. P. Morgan & Co. Through his insatiable appetite for

new ventures in finance and his equally voracious appetite for financial

information, Meyer helped bring the American idea of consumer

finance to France, although at the age of thirty he had never set foot in

the United States. That was soon to change.

During the 1930s, Meyer again came to Citroën’s aid by arranging

a merger to bail the company out. Andre Citroën had extended his

company’s finances in the 1930s, misjudging the extent of the Depres￾The Last Holdouts: Goldman Sachs and Lazard Freres

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sion in France and the effect it had on demand for his automobiles.

Meyer arranged for the Michelin tire company to purchase a control￾ling interest in the company, taking pressure off the French govern￾ment in the process. The government was so impressed by his

ingenuity that it subsequently awarded him the Legion of Honor. But

the political situation in Europe was deteriorating quickly. In 1939, he

decided to move his wife and children to Spain to avoid the Nazis,

who invaded France shortly thereafter. From there, his next stop

would be Lazard Freres in New York. The French bank effectively

would be closed during the Occupation.

By the time Meyer arrived in New York, he was already a legend in

the bank and quickly assumed control of the American operation.

Lazard had been a family-run operation since being founded, and the

New York office was run by Frank Altschul when Meyer arrived. Dur￾ing the late 1930s and early 1940s, Lazard’s independent New York

office was something of a sleepy backwater, not unlike many houses

waiting for better times. It had a small retail operation and several

offices around the country, but it did not have a specialty, nor were

there any prospects of developing one. Meyer was determined to

change it permanently. Another partner arrived in New York shortly

after him, complicating the matter of seniority at the office. With the

arrival of Pierre David-Weill the firm was looking somewhat top heavy.

Quickly, Meyer and Weill displaced Altschul at the top and forced

him into semiretirement. The way was then clear for them to run the

firm as they pleased. But Meyer’s dominant personality soon came to

the fore and he gained primacy at the firm in a very short time.

Lazard Freres was now set to adopt the path he chose.

One of Meyer’s first tasks was to close the retail operation and

return Lazard to the business for which it was best known in Paris—a

private investment banking operation that did not disclose much

about itself or its clients. This aura of mystery served Meyer well in

the next ten years, because Lazard was at best a marginal firm that

needed a complete overhaul. By invoking the French firm’s good

name, he set about to establish Lazard as an underwriter in the

United States, a business still dominated by the top-tier firms. In

order to do so, he would have to establish good relations with senior

bankers at the top firms—a difficult if not impossible task. The easi￾THE LAST PARTNERSHIPS

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