BackRoasting and toasting the deal makers of 2010
Roasting and toasting the deal makers of 2010
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It is time again for the annual DealBook closing dinner, where we toast and roast Wall Street and its deal makers—and look ahead to make a couple of new year’s resolutions.
I’m happy to see so many familiar faces could make it.
There’s Lloyd Blankfein of Goldman Sachs Group Inc. with his new “friend", Mark Zuckerberg of Facebook Inc.. (I know it was a tough year, Lloyd, but do you really have to pay for friends?)
Julian Assange of WikiLeaks kindly got permission from the courts to be here, after his mansion arrest. I just reviewed the seating chart and see Julian is at the table with Brian Moynihan of Bank of America Corp. (Brian, don’t let your BlackBerry out of your sight.)
Timothy Geithner, the treasury secretary, is also joining us this year. We’ve sat you with your buddy—and I’m biting my lip, here—Elizabeth Warren because we know that you were such a proponent of her nomination to run the new Consumer Financial Protection Bureau.
Next to them are Jamie Dimon of JPMorgan Chase and Co. and Vikram Pandit of Citigroup Inc. I sat you with Paul Volcker just to keep the evening lively.
I should note that President Barack Obama had planned to be here, but he couldn’t make it back in time from his vacation in Hawaii. He sent his regrets, citing “fog" on the tarmac. He mentioned that Blankfein and John J. Mack, chairman of Morgan Stanley, would sympathize since they missed their meeting at the White House last year for the same reason.
Warren Buffett, on the other hand, got here with time to spare by train, courtesy of Burlington Northern. (Ba-dum-bump.)
Finally, a special thank you to Fabrice Tourre, or Fab, the suspended employee of Goldman, who volunteered to tend bar this year. The cash register is broken, so he’s keeping tabs on an abacus.
Now onto the official toasts and roasts.
Executive of the year: Robert H. Benmosche
You have to hand it to Benmosche, chief executive of American International Group Inc. (AIG). The tough-talking, sometimes-foul mouthed CEO took over what had to be the most reviled company in the country. AIG was supposed to be left for dead. The government was supposed to be throwing billions of dollars of taxpayers’ money down the bailout black hole.
But Benmosche, who was recently found to have cancer, fought bitterly with the government to run the company his way—and for the most part, he and taxpayers have won. Shares of AIG rose 40% in December alone. While there is still a long way to go, the government is in the black at the moment.
The bailout of AIG will never be popular. But if Benmosche can keep the insurer on the same path, he should be.
The clothes are great, but the governance isn’t: Mickey Drexler
The prince merchant did an outstanding job reviving the J. Crew Group Inc. Business schools should study your turnaround strategy.
But your planned buyout of J. Crew, in conjunction with TPG Capital and Leonard Green and Partners, should be a case study in how not to conduct yourself in a deal. According to J. Crew’s own filing, you held takeover talks for seven weeks before telling the board about your plan.
The deal may ultimately be right for shareholders. After all, they’re paying a 23% premium, and the company’s earnings have been lousy of late.
But for a guy who understands the importance of good looks, the sale process reeks of poor quality.
Making bad music: Guy Hands of Terra Firma
The private equity mogul, who owns EMI (Electric and Musical Industries Ltd), brought one of the most bone-headed lawsuits in history against Citigroup this year. Hands, an outspoken investor who often says things that others won’t, argued that Citigroup hoodwinked him into buying EMI at an artificially inflated price.
We should thank Hands for pursuing the case since it offered a peak behind the deal-making curtain. But given that Citigroup was cleared of any wrongdoing, Hands would have been better off spending his time fixing EMI or selling it to Warner Music, as everyone has hoped for years.
How not to do a deal: BHP Billiton
Marius Kloppers, BHP Billiton Ltd’s chief executive, pursued the largest deal of the year, a nearly $40 billion (Rs1.79 trillion) hostile bid for Potash, the biggest fertilizer company in the world. For months, BHP’s chairman Jacques Nasser, Ford’s former chief executive, crisscrossed the world on a roadshow, selling investors on the deal. Then the Canadian government blocked the deal on the grounds that Potash was a strategic resource. Sure, it was a big surprise. But Rule No. 1 of going hostile is to bid only if you know you can get to the finish line. That means doing all the ground work in advance.
Consider this lesson: Chinese investors pondered making their own bid for Potash, but wisely begged off when they did not get the wink from the Canadian government.
You’ve got guts: Andrew Mason
Mason, the 30-year-old chief executive of Groupon Inc., told Google Inc. to take its $6 billion offer and forget it. Most of Wall Street thought he was nuts. He may be. But give him credit for believing in his vision to the bitter end. After rejecting Google, his online coupon company is about to raise nearly $1 billion and is hoping to pursue an initial public offering by 2011 end.
Several years ago, at the annual DealBook closing bell, I chided Facebook’s Zuckerberg for walking away from a $1 billion offer from Yahoo. Boy, was I wrong.
Mason could be following Zuckerberg’s example—or not. We’ll revisit this subject at next year’s dinner.
Making bonuses better (at least a little): Lloyd Blankfein
It’s unpopular to say anything nice about Goldman Sachs’s over-the-top bonuses. But this year, Goldman Sachs is set to hand out 40% of revenue, far less than in previous years, and the firm plans to tie the money directly to future earnings and stock performance. The move won’t satisfy the company’s fiercest critics, but it is at least a step in the right direction and a nod to the public mood.
Let’s hope that other Wall Street firms that historically had “Goldman Envy" take note of the firm’s bonuses, too.
A sad goodbye: Paul Calello
While we’re on the subject of bonuses, it’s worth mentioning the death of Paul Calello, the former chief executive of Credit Suisse Group AG’s US unit, who died of cancer in November. He wasn’t one of the biggest names in the business. But in an industry that often gets a bad rap, Calello was one of the good guys. Notably, he was one of the early, and only, voices to call for more responsible pay packages. After the crisis, he created a unique plan of paying bankers’ bonuses with the impaired assets clogging the firm’s balance sheet.
So far, the plan is working.
Sadly, he won’t be able to see how well it worked.
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©2011/THE New York Times
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