Lehman: Isaacs' realm; Lehman's Board of Directors
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Please, write something nice,” my editor pleaded. “Must you assassinate everyone straight through the heart with your stiletto?” Well, even by my high standards, Lehman Brothers, Euromoney’s choice of best investment bank in 2005, is on a glittering trajectory.
First-quarter profits were good, showing a 24% increase in net income to a record $1.1 billion, although they seemed drab when juxtaposed with Goldman Sachs’s spectacular results. Perhaps most important, Lehman is successfully diversifying away from its traditional fixed-income niche. The firm was ranked seventh in global M&A for 2005 and placed fourth in the 2006 first-quarter global announced M&A league table. That’s good news for an already happy group of shareholders, who have benefited from a doubling of the share price during the past two years.
In Q1 2006, Lehman generated some 40% of its revenues from outside the US, with Asia Pacific revenues growing by 70%. Jeremy Isaacs, the firm’s chief executive in Europe and Asia, should be dancing a jig of joy. “He’s done well,” a rival told me. “In retrospect, it was a good move not to pay up for Cazenove when they decided to auction themselves to the highest bidder in 2004.”
Ah yes, I do recall hearing about a clandestine dinner between Isaacs and tall, dark and handsome Robert Pickering, Caz’s chief executive. I wonder if the two great men discussed Pickering’s potential role in the new organization?
Call me cynical, but I am convinced that what drives most of these banking liaisons is jobs for the boys. However, one mustn’t be too hard on Robert. He has just endured that most horrendous of afflictions (which all bankers secretly dread): an ED or, for the non-initiated, an expensive divorce. It’s so heart-breaking to see all those millions end up in her bank account, isn’t it?
Perhaps Isaacs didn’t buy the firm because he took the view that Cazenove’s strength was domestic UK corporate broking and this expertise was rapidly becoming redundant. In the 21st century, the investors who count are hedge funds, and was Cazenove in this flow? I agree with Isaacs. No one has ever explained to me satisfactorily what a corporate broker does all day long. But they probably feel the same about journalists. Ultimately, JPMorgan captured the Cazenove prize. There are mixed reports about how this blue-blooded joint venture is faring. I promise to lift the kimono in a future column.
Instead of forking out on an entire firm, Isaacs went in to recruitment mode and hired a number of A-list investment bankers. The roll call is long and includes Anthony Fry and William Vereker in Europe, as well as Zhizhong Yang and Masaru Shibata in Asia.
Isaacs is achieving results. Recently, Lehman has been involved in several high-profile European deals, such as the bidding war for the London Stock Exchange, and ABN Amro’s purchase of Banca Antonveneta.
One question lurks at the back of my mind: if Isaacs’ empire is notching up successive successes, what is the need to hire Andrew Gowers, ex-editor of the Financial Times, on a stupendous stipend? And what will Gowers’ remit actually be: corporate communications, brand development, or perhaps just chief of staff to the increasingly important Isaacs?
For all Isaacs’ prowess in Europe, the brand of Lehman Brothers is inextricably linked to one man: Dick Fuld, the bank’s chairman and chief executive. Fuld has been at the firm for 37 years. Often dubbed “tough as nails”, he is regarded by competitors with a grudging mixture of respect and fear.
Now no single individual, however tough and clever, can create success on his own. Often, such benevolent dictators rely on the counsel of a close group of advisers to help keep them on the straight and narrow. Scanning Lehman’s board of directors to discover the type of individual Fuld surrounds himself with, I pursed my perfectly painted lips. Rarely have I seen such a motley collection of the great and the good. Nevertheless, Lehman is to be commended for at least one thing: in an industry that worships youth, the Brothers’ board is a shining beacon of non-ageism. Sprightly seniors abound and half the board are septuagenarians.
My lack of conviction about the make-up of this group might, I admit, be prejudiced because Christopher Gent, the former Vodafone chief executive, is one of them. I am underwhelmed by Sir Christopher, who seems to waft along on the tide of his own PR machine. I shed no tears in March when he stepped down as Vodafone life president (a ridiculous title that shrieks of hubris). Gent’s grandiose acquisition of Mannesmann in 2000, for which he paid some $200 billion, left me gnashing my teeth with rage. It proved disastrous for Vodafone shareholders, albeit delicious for Gent’s own net worth. Remember how he received a £10 million special bonus merely for doing the deal?
I am also sceptical about another Lehman director: 74-year-old Thomas Cruikshank, retired chairman and CEO of oil services company Halliburton – the company forever associated with George W Bush’s inner cabal. Let’s hope the Halliburton connection won’t lead to any quail-hunting invitations for Dick Fuld from another former CEO of the company, US vice-president Dick Cheney, whose errant ways with a shotgun have prompted much hilarity among my friends in Washington. “I had a terrible nightmare. I dreamt I was at a Washington party and I had to choose between Dick Cheney taking me on a hunting trip or Ted Kennedy driving me home,” quipped one.
