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Skip Navigation LinksHome :: Back Issues :: Jeff Peek: Is this the man to run Merrill?

May 2001

Jeff Peek: Is this the man to run Merrill?


Colleagues describe Jeff Peek as straightforward, engaging, decent, and a man with a clear vision and a good sense of humour.




       
Jeff Peek
Would Jeff Peek like to be chief executive of Merrill Lynch? After a few moments' hesitation, he replies: "well, yes I would".

It is, Euromoney is told later, the first time he has been asked publicly to state whether he would be interested in running the US financial services firm, and his response is typically reserved. Colleagues describe him as straightforward, engaging, decent, and a man with a clear vision and a good sense of humour.

"It certainly doesn't take up all my time," he continues. "But yes, I do think about it occasionally. It would be a huge job, and a huge honour. But this job is big enough for now."

By the end of the year he and the other two main candidates - head of CICG Thomas Davis and head of private client Stan O'Neal - ought to know their fate. Although incumbent CEO David Komansky is not due to retire until 2004, he has let it be known that he and the board are to decide on who will fill the all-important post of president by the start of 2002.

That's the job Merrill has traditionally given to the heir-apparent, and wasn't even open when Peek took over asset management in December 1997. Herb Allison, formerly head of the corporate and institutional client group (Merrill's name for its investment bank) and a 28-year veteran at the firm, replaced Komansky as president in 1995 when the latter became CEO.

But the board forced Allison out of both his position and the firm in July 1999, and have left it vacant since. Allison was held largely responsible for the poor handling of the $1 billion loss in the firm's bond markets group in late 1998. And in the first half of 1999 he and John Launny Steffens, then head of the Private Client Group, battled over the group's online retail broking strategy. Allison wanted to create a new unit, Steffens wanted to keep it as an adjunct to Private Client. Steffens won; Allison was gone within two months.

The candidates might even find out before the end of the year - some think Komansky will use his summer vacation to make his decision, in between watching his beloved Yankees, of course.

Peek's claim is a strong one. He joined Merrill as a managing director in the investment-banking division in 1983, and within a year had been made head of the firm's financial institutions group. He took on additional responsibility for telecoms, media and technology, utilities and energy companies in 1992, served as director of the firm's research and economics division, and was co-head of investment banking when he left to join MLAM.

As a specialist in financial institutions he has advised Merrill on almost all of the acquisitions they made in the 1990s, including the acquisition of UK investment bank Smith New Court in 1995. And of course he has been responsible for the relatively painless integration of the most expensive acquisition thus far, UK firm Mercury Asset Management. "Compared to Smith New Court, especially the research function which I was directly responsible for, integrating Mercury was a walk in the park," he says.

Stephen Zimmerman, retiring joint-COO of MLIM and former co-head of Mercury, respects Peek for how he handled the merger. "We couldn't have wished for a better partner. He has been very supportive, listened to our concerns, and opted not to go for a crash-bang-wallop integration. If he had, it could have been a disaster."

This experience as adviser and practitioner would be a useful asset for the next CEO of Merrill. The pressure for both Merrill and Morgan Stanley to do a transformational deal such as the Citicorp-Travelers merger continues, and even drew a double-edged comment from Komansky last year on the likelihood and merits of Merrill merging with HSBC - a popular rumour since the two announced an ex-US banking and brokerage joint venture last April. Such a merger, said Komansky, would produce a truly global leader.

But Merrill would not want to be subsumed in such a large organization and, insiders speculate, may seek to close the gap between the two sides' market capitalizations before going for a merger.

Peek is not the front runner in the race to head Merrill. Stan O'Neal is. The former chief financial officer has been running the influential Private Client Group since February 2000, and that in itself appears to have sealed matters for some people. "Merrill has never appointed a CEO who hasn't worked in Private Client," says Ray Soifer, who runs Soifer Consulting. "And I'm not sure they're going to change that just yet."

That would rule out both Peek and Davis. But Merrill has shown some willingness to break with tradition: Allison would have been the first CEO never to have held a post in private client, but the manner of his departure is a warning sign to any of the candidates who don't take the influence of that group seriously - not least because Komansky himself is proud of his roots as a Merrill broker.

This could be where Peek has the advantage over the other two candidates. While he does not run Private Client, he has spent much of the last three years with the brokers, or financial consultants, winning their respect.

This was no small task. The financial consultants were the only distribution channel MLAM had at the time, and MLAM's products stank. The FCs could sell other firms' funds, but had largely remained loyal. By 1997, however, performance was so bad that MLAM had net outflows from its funds, and that hit the FCs' commissions. They were, to put it mildly, not happy.

"The FCs felt there was little or no accountability in Princeton [MLAM's headquarters] for the poor performance," says Kevin Rendino. "Whether totally true or not, we had lost their trust, and that business is all about trust. Jeff came in and spent two years running all over the country first to apologize, then explain, and ask for another chance. Now we have more products and better performance to offer them, and they're happy to listen."
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