Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2: Hello and welcome to another episode of the Odd Lots podcast.
Speaker 3: I'm Jill Wisenthal and I'm Tracy Alloway Chrasy.
Speaker 2: I would say that within the broader realm of finance
Speaker 2: and markets and Wall Street and stuff that we cover
Speaker 2: like deals in deal making, kind of maybe we don't
Speaker 2: cover it enough.
Speaker 3: Yeah, it's kind of. I guess it's unfortunate because I
Speaker 3: think when a lot of people think about Wall Street,
Speaker 3: I mean, the guy doing big M and A deals,
Speaker 3: the rainmaker is kind of one of the images that
Speaker 3: people have in their minds. I guess, alongside you know,
Speaker 3: traders taking oodles of risk. I think people are always
Speaker 3: thinking about the guy on the phone. He's like, you know,
Speaker 3: talking to his big client. He's going to strike this big,
Speaker 3: multi billion dollar deal. So yeah, lots of interest.
Speaker 2: Yeah, there's like two images, right, the guys staring at
Speaker 2: his screen clicking either buy or sell as the line
Speaker 2: moves really fast. And then someone you know, working over
Speaker 2: lunch bulfing and having a nice lunch or stuff. But
Speaker 2: I don't really know, I mean I don't know that
Speaker 2: much about the first one. I really don't know that
Speaker 2: much about the second one. Those seem like very good jobs.
Speaker 2: I think I would be very terrible at that job.
Speaker 2: But yeah, there's so much to learn on that. I
Speaker 2: have so many questions about this area. And we should
Speaker 2: probably talk about deals and the trajectory of deals and
Speaker 2: the history of deals and the future of deals a
Speaker 2: little bit more.
Speaker 4: Let's do it.
Speaker 3: So I have to say I used to cover the
Speaker 3: investment banks for the ft, and within that there was
Speaker 3: obviously quite a lot about the m and a business.
Speaker 3: The one thing I know for sure is that the
Speaker 3: Bulge Brackets, even though MNA is not the entirety of
Speaker 3: their business, as you know, they care a lot about it.
Speaker 3: They care a lot about the league tables and who's
Speaker 3: doing better than whatever other firm. It's extremely competitive. So
Speaker 3: let's dig into it.
Speaker 2: You know, just to reveal my own ignorance a little
Speaker 2: bit more. I don't even think I have a great
Speaker 2: handle on the question of why within one firm, banking
Speaker 2: and trading are often parts of the same company.
Speaker 3: Oh, why they're the same company. Yeah, I thought you
Speaker 3: were going to say you didn't understand why they were separated. No,
Speaker 3: and that's why I was shocked.
Speaker 2: No, Like, why within a large firm. These are natural
Speaker 2: compliments to each other as part of the business. Even
Speaker 2: that I don't have a great handle.
Speaker 3: On, I have a feeling that our guests goes exactly
Speaker 3: the answer to that question.
Speaker 2: We do, indeed have the perfect guest. We are going
Speaker 2: to be speaking with Scott Bock, the longtime former chairman
Speaker 2: and CEO of the investment bank Greenhilen Company. He is
Speaker 2: out with a new book called Surviving Wall Street. So Scott,
Speaker 2: thank you so much for coming on odd Lots.
Speaker 5: It's great to be here. Thank you.
Speaker 2: There's so much I want to talk about it, and
Speaker 2: it's so bad that we could probably spend an hour
Speaker 2: with you just answering very rudimentary questions about the business
Speaker 2: that seems like out of a waste of your time.
Speaker 2: I have a random question when I've always wondered about
Speaker 2: for so long. You can make a lot of money
Speaker 2: in investment banking and deal making and making deals happen.
Speaker 2: What is the investment banker bring to the table? You know,
Speaker 2: I say a company wants to buy another company, Why
Speaker 2: can't they just go find it in the house. What
Speaker 2: does the investment banker bring to the table that's so
Speaker 2: valuable that companies, at least in some cases, are willing
Speaker 2: to make the bankers quite rich.
Speaker 6: You know, I actually answer that question early in the
Speaker 6: book because I think most people don't really understand they
Speaker 6: pay these big fees. What do these people actually do?
Speaker 6: And there's actually several things they do. Number one, they
Speaker 6: may tell you it's the right time for an acquisition.
Speaker 6: They might tell you what is the right value for
Speaker 6: that acquisition. They might tell you how your stock price
Speaker 6: might react to that acquisition. Importantly, they also give the
Speaker 6: board of directors comfort that you know, management hasn't gone
Speaker 6: off the reservation or the deal actually make sense, it's
Speaker 6: going to get a reasonable response. And so it's a
Speaker 6: kind of a very broad role. And you know, it's
Speaker 6: one thing I like about it versus say training or
Speaker 6: so many other aspects of Wall Street is you know,
Speaker 6: this is never going to be outsourced to AI. There's
Speaker 6: never going to be a button you push and an
Speaker 6: M and a deal happens. You know, each one is
Speaker 6: so different and so much just kind of the human
Speaker 6: touch of trying to get people on both sides of
Speaker 6: a transaction to come to agreement.
Speaker 3: Kind of an expensive sanity check on corporate management, though,
Speaker 3: if you get them to talk to bankers and make
Speaker 3: sure that you know the deal is not completely crazy.
Speaker 3: But to Joe's point about the bulge brackets and why
Speaker 3: do they have M and A on top of trading
Speaker 3: or debt issuance and that sort of thing, maybe we
Speaker 3: should talk about the big trend of the early two thousands,
Speaker 3: which was all the boutique M and A firms getting
Speaker 3: started and then getting a lot of traction versus the
Speaker 3: bulge bracket guys like a Goldman Sachs or a Morgan Stanley.
Speaker 3: And as far as I remember, the big pitch for
Speaker 3: the boutiques was that they don't have a conflict of
Speaker 3: interest and you know they're entirely focused on getting the
Speaker 3: best deal for their clients. Is that the pitch?
Speaker 5: It was that simple, That indeed was the pitch.
Speaker 6: But you know that pitch developed out of circumstances as
Speaker 6: opposed to being the original strategy. Here, here's a short
Speaker 6: history of my career, which is kind of laid out
Speaker 6: in the book. Okay, when I started in the business
Speaker 6: back in you know, graduating from college in nineteen eighty one.
Speaker 6: It's a terrible time. Dow Jones is below a thousand,
Speaker 6: which a first crossed more than ten years before that,
Speaker 6: you know, M and a almost unheard of private equity,
Speaker 6: hedge fund, activist investor. Those phrases didn't even exist, and
Speaker 6: the business was very specialized. So if you wanted to
Speaker 6: get a tech deal done, you didn't go to Morgan
Speaker 6: Stanley or Golden Sachs. You went to Hamburton Quist or
Speaker 6: Alex Brown or Montgomery Securities. If you wanted to do
Speaker 6: a UK deal, you went to what was called a
Speaker 6: British merchant bank Kleinberg, Benson, Warburg, sg Warburg Bearing Brothers,
Speaker 6: et cetera. So everything was highly specialized as to what
Speaker 6: you did, and what happened is sort of the next
Speaker 6: ten to fifteen years was a massive wave of mergers.
Speaker 6: At the end of that wave of mergers, you know,
Speaker 6: the four what they call the four horsemen who did
Speaker 6: technology were gone. All the British merchant banks were gone.
Speaker 6: Many US firms, including like Donaldson, Lufkin and Jenrett had
Speaker 6: been absorbed, and essentially, at the time Greenhill started, I
Speaker 6: would say almost all the advisory fees in the world
Speaker 6: were paid to one of nine firms. There were six
Speaker 6: in America and three in Europe. So it got very,
Speaker 6: very concentrated, and I would say Greenhill was formed, and
Speaker 6: then a whole bunch of other firms sort of followed us,
Speaker 6: particularly once we went public. Greenhill was formed as kind
Speaker 6: of a reaction to that consolidation. It's like you'd go
Speaker 6: to a client and say, there are sort of two
Speaker 6: flavors here. There's nine guys selling one flavor, which is
Speaker 6: one stop shopping all the different products, very sales oriented approach,
Speaker 6: and then we're selling this other flavor, which is we're
Speaker 6: totally aligned with you. All were focused on is M
Speaker 6: and A. We don't have anything to cross sell you.
Speaker 6: And one thing I talk about in the book, which
Speaker 6: is kind of interesting, is what really drove that conflict
Speaker 6: pitch to clients was not something that anything to do
Speaker 6: with M and A. I think it's when Elliott Spitzer
Speaker 6: went after Merrill Lynch and other firms and eventually had
Speaker 6: a settlement with whole industry.
Speaker 3: We just recorded with the Henry Blodgett follow Yeah.
Speaker 6: That look and he sorry to say it got in
Speaker 6: a little bit of trouble for that line on the episode.
Speaker 6: You may recall that, but yes, he was focused on,
Speaker 6: you know, research, analysts writing glowing reports for companies they
Speaker 6: didn't believe in to try to get share sold in
Speaker 6: an IPO. But you know, it woke up corporate America
Speaker 6: to the fact that sometimes there are conflicts of interest
Speaker 6: you're not aware of, and why not hire a firm
Speaker 6: that doesn't have any of those. So we kind of
Speaker 6: adopted that as our strategy as our calling card, and
Speaker 6: it worked really well.
Speaker 3: So conversely, the story I always heard from bulge brackets
Speaker 3: was like, Okay, you can go with a smaller firm
Speaker 3: that might not have a conflict of interest in all
Speaker 3: these other businesses trying to get your attention and sell
Speaker 3: you stuff. But if you go to a boutique bank,
Speaker 3: there are some downsides. So obviously they don't have the
Speaker 3: same financing and credit and capital market services that a
Speaker 3: bulge bracket would have. And also they get paid only
Speaker 3: when they complete the deal, and so you know they
Speaker 3: want to complete the deal and they might not actually
Speaker 3: be providing you advice on why you shouldn't do the deal.
Speaker 3: What do you say to that pitch?
Speaker 6: Look, that is the legitimate counterpoint, and then the counterpoint
Speaker 6: to that is yes, but our business is built entirely
Speaker 6: on reputations, and if we're out there telling companies to
Speaker 6: do deals that don't really make sense, it's going to
Speaker 6: hurt our reputation. We're in a long term business. We're
Speaker 6: trying to build a brand, trying to build a client base,
Speaker 6: and so but fundamentally there's room for both players, and
Speaker 6: both players have certainly thrived in the year since then.
Speaker 6: His M and A has really boomed in America and
Speaker 6: around the world. But what we did and what really
Speaker 6: differentiated us, we had a different strategy. It was a
Speaker 6: different flavor for companies, and many of them were worried
Speaker 6: about conflicts, or maybe they liked a real small firm approach,
Speaker 6: or they liked the hands on sort of seenior guys
Speaker 6: working on the day to day aspect of the deal.
Speaker 6: And so it worked very well, you know, and really
Speaker 6: a whole bunch of firm followed us into that once
Speaker 6: we actually went public and had a lot of success
Speaker 6: with that.
Speaker 3: Yeah, we should talk about that, because you were kind
Speaker 3: of a victim of your own success in some ways.
Speaker 2: Just to set the context for the rest of the
Speaker 2: conversation a little bit more, why don't you just sort
Speaker 2: of fill out the short version of your career history
Speaker 2: and Greenhill specifically. You talk in the book about the
Speaker 2: founder Bob Greenhill, also at Morgan Stanley, but just sort
Speaker 2: of give us like the sort of the rest of
Speaker 2: the outline of sure your slash green Hill's history.
Speaker 6: Sure, Sure, So I worked at Morgan Stanley for about
Speaker 6: ten years after a brief time at the law firm,
Speaker 6: walked out Lipton doing M and A. I was at
Speaker 6: a vastly different level than Bob Greenhill. He is a
Speaker 6: full generation, probably twenty five years older than I am.
Speaker 6: So at the time I moved for some period to
Speaker 6: London for Morgan Stanley, I was an associate, pretty lowly
Speaker 6: job at the firm. Bob was president, pretty senior job
Speaker 6: at the firm. By time I came back, he was gone.
Speaker 6: What had happened and you guys alluded a few minutes
Speaker 6: ago to know why are sort of bankers and traders
Speaker 6: under the same roof, well back in those days is
Speaker 6: one that was first happening, and that caused a bit
Speaker 6: of a turf war really between a power struggle really
Speaker 6: between Bob Greenhill and John Mack, who obviously went onto
Speaker 6: an extraordinary career in a couple of different places and
Speaker 6: as trading really grew in terms of scale and volume
Speaker 6: and how much money you could make, how greatly you
Speaker 6: could scale that business and put capital to work, you know,
Speaker 6: the investment banking business became less important. I mentioned in
Speaker 6: my book a great quote from a mentor of mine
Speaker 6: at Morgan Stanley, who I don't mention his name, but
Speaker 6: he used to say, investment banking is the hood ornament
Speaker 6: on the Mercedes. The engine of the Mercedes is the
Speaker 6: trading is the trade and trading operation. So Bob Greenhill
Speaker 6: ended up going to work briefly for a client of
Speaker 6: his name, Sandy Wild, another famous guy in our industry.
Speaker 6: He was not really well suited. I think he would
Speaker 6: even agree with this as kind of a pure administrator
Speaker 6: a manager. He's a deal maker. And so he ended
Speaker 6: up having a bit of a struggle there with another
Speaker 6: guy you may have heard of, Jamie Diamond, who was
Speaker 6: a very world at that level exactly, who was a
Speaker 6: very young guy at the time. I'm working for Sandy
Speaker 6: wil his mentor early in his career, and so they
Speaker 6: had a falling out.
Speaker 5: Bob left.
Speaker 6: He hung out his own shingle, and I think he
Speaker 6: did it not so much with any sort of grand strategy.
Speaker 6: He did it with the sense of, you know what,
Speaker 6: the big firms are really focusing on these capital businesses.
Speaker 6: I like advising clients on deals. I'm going to hang
Speaker 6: out my shingle to do that. And I joined him
Speaker 6: in the pretty early days when the firm is tiny.
Speaker 6: I think it had announced one transaction, and I went
Speaker 6: really for the same reason. Actually I left between the
Speaker 6: announcement and the closing of the Dean Witter merger with
Speaker 6: Morgan Stanley. The firm is going to go from a
Speaker 6: few thousand people to forty some thousand people. And to
Speaker 6: be honest, I never saw myself working for a place
Speaker 6: with forty thousand people, and so I was kind of
Speaker 6: open to the idea of going to a small or
Speaker 6: more focused place. So when Bob called, I took the
Speaker 6: call and went there very quickly.
Speaker 3: Can I ask a cultural question, because I mean, the
Speaker 3: book is called Surviving Wall Street and you get into
Speaker 3: I guess, the daily rhythm of life working in a
Speaker 3: business like that. But whenever I talk to or when
Speaker 3: I used to talk to a lot of the big
Speaker 3: investment banks, all the management likes to talk about how
Speaker 3: special their culture is. We do things differently to others.
Speaker 3: So I guess my question is what's the cultural difference
Speaker 3: I'm doing air quotes here on a podcast. I don't
Speaker 3: know why, but what's the cultural difference between being a
Speaker 3: trader versus someone in M and A who's presumably very
Speaker 3: client focused? And then how would you describe the cultural
Speaker 3: differences between different m and a firm slash banks themselves.
Speaker 3: Is it really all that different?
Speaker 6: I think it does differ quite a bit. So first
Speaker 6: the question of sort of traders versus bankers. I mean,
Speaker 6: trading is an analytical profession, it's a I think it's
Speaker 6: more of an individualistic profession. You know, you're the guy
Speaker 6: trading a particular kind of security.
Speaker 3: Just you and your screen, Like like your screen.
Speaker 6: Look, you spent a lot of time at the screen,
Speaker 6: and you all sort of tied to the market.
Speaker 5: I mean your day.
Speaker 6: You get there really early in the morning because you
Speaker 6: want to be ready for markets to open. You're there
Speaker 6: for the full day, the closed, you go home pretty
Speaker 6: soon after that. Investment banking is much more of a
Speaker 6: team sport where literally, you know, in your junior years,
Speaker 6: you're sitting there at nine o'clock having you know, pizza
Speaker 6: or Chinese food. You just ordered in with your colleagues
Speaker 6: because you've got two more hours or three more hours
Speaker 6: of work to do that night. So it's a real
Speaker 6: camaraderie that develops in investment banking and deal making in
Speaker 6: part because people live together so much, they work long hours,
Speaker 6: and they also travel together. So it really develops a
Speaker 6: strong camaraderie, which is why culture actually is very important.
Speaker 6: And yes, everyone says they've got a fabulous culture. I
Speaker 6: will tell you I believe it. Greenhill really did, and
Speaker 6: that won't surprise you at all. But you know, look,
Speaker 6: you read these things about analysts who are being abused
Speaker 6: for being overworked to the point where literally people are
Speaker 6: getting sick, in some cases worse than that. And you
Speaker 6: want to have a place where people feel like a human,
Speaker 6: you know, where they're treated with respect by the more
Speaker 6: senior people. Yes they work harder, yes they get paid
Speaker 6: less money, but you've got to treat those people with respect.
Speaker 6: And I think we did that, and I think many
Speaker 6: of the best firms do that. I think there have
Speaker 6: been some firms over the years that are kind of
Speaker 6: too much of a sweatshop mentality, and that really doesn't
Speaker 6: I think pay off in the long run.
Speaker 3: Joe, you know what happens after eleven pm, after the
Speaker 3: bankers are finished eating Chinese food and they've done the deal,
Speaker 3: they send them to the lawyers.
Speaker 6: And then the lawyers have.
Speaker 3: To stay up from eleven pm to six am to
Speaker 3: finish the docs. I know this from personal experience.
Speaker 6: And now you have just explained why I left practicing
Speaker 6: my husband.
Speaker 2: You said something at the very beginning that I think
Speaker 2: was very important, which is that when you started your
Speaker 2: career in the early eighties, the scale of the deal
Speaker 2: making industry set aside the deal making industry deals period,
Speaker 2: we're just not as prevalent. It was just not what change.
Speaker 6: I think this is going to segue into a really
Speaker 6: interesting topic, but it did change right around that. I mean,
Speaker 6: a grand innovation at Morgan Stanley in the years before
Speaker 6: I got there was when somebody said to Bob Greenhill, hey,
Speaker 6: why don't you form a group with three other people
Speaker 6: and see if we can sell advice to companies who
Speaker 6: want to do M and A deals. There were four
Speaker 6: people in the group, right, So it was a tiny,
Speaker 6: tiny business. And even when I started got to law
Speaker 6: school in nineteen eighty four, it was a very small business.
Speaker 6: I think looking back, what really drove a lot of
Speaker 6: that was globalization. I think if you think back to,
Speaker 6: you know, when I was a kid. I'm sure probably
Speaker 6: you're younger, but when you were a kid, I mean,
Speaker 6: every town had its own newspaper, every town had its
Speaker 6: own bank, every region had its own soft drink brands,
Speaker 6: its own ice cream brands, its own you.
Speaker 5: Know, yeah, other you know, consumer brands.
Speaker 6: And if you think about what happened in the ensuing years,
Speaker 6: was you had trillions of dollars of m and A
Speaker 6: that essentially rolled up companies into first and national and
Speaker 6: then global sort of champions. And I looked back, for example,
Speaker 6: because I thought this might be a topic given what's
Speaker 6: going on in the world right now. And if you
Speaker 6: look at cross border m and A and meaning buyer
Speaker 6: one side, target and another from American companies. I mean,
Speaker 6: I look back in the early nineteen eighties, there were
Speaker 6: some years when there was roughly zero, and for the
Speaker 6: last ten to fifteen years it's between five hundred billion
Speaker 6: and a trillion dollars a year. So that's what really
Speaker 6: drove it was you had a very fragmented industry in
Speaker 6: every industry and still there's plenty of there's all more
Speaker 6: deals to be done, but what really happened was forming
Speaker 6: these national and global companies through M and A.
Speaker 3: So one thing you describe in your book and you
Speaker 3: sort of explain all these different events through your personal career.
Speaker 3: But five crises that defined Wall Street. So the collapse
Speaker 3: of LTCM, the bursting of the dot com bubble, the
Speaker 3: two thousand and eight financial crisis, the COVID pandemic, and
Speaker 3: then the sort of aftermath. Talk to us about the aftermath,
Speaker 3: because I think a lot of people would. I think,
Speaker 3: you know, twenty twenty two was a terrible year for markets,
Speaker 3: and we saw a lot of deal volume collapse. But
Speaker 3: what's the sort of existential crisis that's facing deal making
Speaker 3: in the post pandemic period?
Speaker 5: Sure?
Speaker 6: Yeah, Much of the book is really about leadership and
Speaker 6: sort of navigating those five crises. And the reason Surviving
Speaker 6: is in the title is that a large majority of
Speaker 6: the Wall Street firms that were in business when I
Speaker 6: started are long gone. So it really is a game
Speaker 6: of survival played on a grand scale. And I do
Speaker 6: talk about those five crises. The fifth one is the
Speaker 6: hardest one to name in a pithy way, but I
Speaker 6: think in some ways it was the most complicated because
Speaker 6: I would say, if you wanted to describe it, I
Speaker 6: would say it was the combination of COVID recovery when
Speaker 6: there was a ton of stimulus put into the economy,
Speaker 6: and the Ukraine invasion. The combination of those things drove
Speaker 6: up inflation, drove up interest rates, and I think it's
Speaker 6: fair to say we are still kind of reeling from that.
Speaker 6: I think they even had political implications in terms of how,
Speaker 6: you know, what president got elected and for what reasons
Speaker 6: and so on. So think it was a very sticky
Speaker 6: crisis that also involved the way we work, not just markets,
Speaker 6: not just all the interest rates are we're going to
Speaker 6: bring them down to try to reflight the economy and
Speaker 6: all that, but really literally the way people work, you know,
Speaker 6: trying to work from home and you know, not having
Speaker 6: the same sort of in office culture and training and
Speaker 6: kind of team efforts to win and do business. And
Speaker 6: so that's been a hard one, I think for American
Speaker 6: business to work their way through.
Speaker 2: I want to talk more about the actual reality of
Speaker 2: globalization and what that means, because to this day, countries
Speaker 2: feel prideful about their national champions even in Europe largely
Speaker 2: integrated economies. Some of the issues with further integration has
Speaker 2: to do with the fact that specific countries within the
Speaker 2: EU don't want to see their national defense company whatever
Speaker 2: it is, rolled up into something that is not stuck
Speaker 2: to the nation. What happened in the early eighties such
Speaker 2: that either countries or regions or companies that there was
Speaker 2: this ability like discomfort with folding them all up or
Speaker 2: who saw that vision like talk to us about like
Speaker 2: this idea that look, there's a lot of publishing magazine
Speaker 2: companies in every country. They don't all have to be
Speaker 2: there are economies of scale to be had by integrating them.
Speaker 2: Like where did that come from? Or who? How did
Speaker 2: that get greenlit?
Speaker 6: Well, I think, you know, the nineteen seventies was a
Speaker 6: really stagnant period. I mean I was in high school
Speaker 6: in early years of college in that period, but it
Speaker 6: was a really stagnant right. The Dow Jones was lower
Speaker 6: kind of at the end of that decade than it
Speaker 6: was at the beginning. So that's a long, difficult period.
Speaker 6: And I think what you know, with Ron Reagan, with
Speaker 6: a view that we're going to be more kind of
Speaker 6: more real capitalism, we're going to you know, let capital
Speaker 6: flow freely. We're going to reduce regulation, reduce taxes, all
Speaker 6: that kind of stuff and try to get things to grow.
Speaker 6: That that was kind of that spread around the world
Speaker 6: to a fair degree. And now that I look back
Speaker 6: as a nation we think about whether we want to
Speaker 6: reverse globalization, I think back, like, what were the key events?
Speaker 6: I would say number one the European Union really coming
Speaker 6: together in a more meaningful way.
Speaker 5: Right, there's not a day they.
Speaker 6: Just said, okay, we're going to have a European Union.
Speaker 6: It came and fits and starts, It got more integrated.
Speaker 6: That euro was sort of formed as its own currency.
Speaker 6: You know, I remember it because it happened right before
Speaker 6: I moved to London from Morgan Stanley, when the Berlin
Speaker 6: Wall fell. That really changed the attitude in Europe a
Speaker 6: lot that Europe was not going to be a bigger,
Speaker 6: more integrated place. There was a lot of opportunity economically,
Speaker 6: you know, clearly China joining the World Trade Organization was
Speaker 6: another big event. But I also think what drove it,
Speaker 6: and this is maybe a little bit circular, but I
Speaker 6: think it's true. I think this trillions of dollars worth
Speaker 6: of m and A transactions that the more you did.
Speaker 6: You know, it's like deals, baget deals. Right, if you're
Speaker 6: a in an industry and you see one of your
Speaker 6: competitors buy something that gives them a leg up, and
Speaker 6: what you're doing, You're going to go out and try
Speaker 6: to find something over your own. And so it kind
Speaker 6: of fed on itself and obviously in the end created
Speaker 6: a massive industry that really is focused on doing transactions.
Speaker 6: And I was I was a part of that industry.
Speaker 3: Here's a very loaded question, but what percentage of M
Speaker 3: and A transactions would you say are people based trying
Speaker 3: to copycat their competitors and going, well, they did a
Speaker 3: big M and A deal, I want to do it too,
Speaker 3: versus how many are actually driven by rational strategic argument?
Speaker 6: Well, I think it's a little bit of both, but
Speaker 6: I do think they're mostly driven by rational strategy, and
Speaker 6: it makes sense. I think those broad strategic themes. I
Speaker 6: think cause one company that's a bit more of a leader,
Speaker 6: a bit more kind of proactive, will do something and
Speaker 6: then it kind of wakes up the other ones that
Speaker 6: they need to do something too. And you know, particularly
Speaker 6: if you think about how technology has changed so many industries,
Speaker 6: I mean, you know, take your industry, Take the media industry. Yeah,
Speaker 6: I mean it's so called legacy media. Boy, they have
Speaker 6: had a rough generation, not a rough couple of years,
Speaker 6: like a rough generation. You know, Newspapers sort of largely
Speaker 6: died except for a few like the New York Times,
Speaker 6: and you broadcast TVs kind of sort of died. Cable
Speaker 6: TV struggling, but.
Speaker 3: You know, you keep Podcasts are doing okay.
Speaker 6: Podcasts are doing okay. Streaming is doing more than okay.
Speaker 6: So it's not that the business went away, it's just
Speaker 6: that it evolved, and if you didn't find a way
Speaker 6: to evolve with that, your company was going to get
Speaker 6: left behind.
Speaker 2: I'm really interested in this idea of this sort of
Speaker 2: like spread of Reaganism and this comfort with capitalism, and yeah,
Speaker 2: the comfort with the realities of capitalism that your inefficient
Speaker 2: company here might be better as part of something multinational
Speaker 2: tied to. Was that something that like you could see
Speaker 2: like you know, softening. You know, it's interesting one thing
Speaker 2: that we should talk about. We're already seeing how a
Speaker 2: sort of discomfort with globalization is killing deal activities. A
Speaker 2: really good example is US Steel. The discomfort both the
Speaker 2: Biden and the Trump administrations had with the idea of
Speaker 2: selling that to Nippon Steel. But just talk about like,
Speaker 2: was there a sort of like softening in the regulatory
Speaker 2: environment everywhere is such that these agglomerations conglomerations were enabled
Speaker 2: to happen.
Speaker 6: You know, I'll tell you a story that really makes
Speaker 6: it seem in some ways even more cultural than sort
Speaker 6: of legalist in the regulatory When I remember when I
Speaker 6: went to Morgan Stanley in nineteen ninety again right after
Speaker 6: the Berlin Wall had fallen, and just to paint a
Speaker 6: picture Morgan Stanley's office, and we're in a rabbit warrant
Speaker 6: of small offices behind the John Lewis Department store on
Speaker 6: Oxford Street.
Speaker 5: Right.
Speaker 6: It was not in the City of London, which is
Speaker 6: their version of Wall Street. It was not in Canary
Speaker 6: warfolthough later it would be when that got built. It
Speaker 6: was a very very small business. Goldvin Sachs was very
Speaker 6: small over there too. But we were I literally look
Speaker 6: back on and think, you know, we were a little
Speaker 6: bit like missionaries. We weren't selling a religion, but when
Speaker 6: we traveled the places like France and Germany and the
Speaker 6: Nordic region and so on, the religion we were spreading
Speaker 6: is that you should focus on shareholder value. Shareholder value.
Speaker 3: You heard the Good Book of Shareholders.
Speaker 6: Exactly because you know this this thing that we totally
Speaker 6: came to take for granted about like what our corporation's for,
Speaker 6: what is their purpose is Americans would tell you, and
Speaker 6: I think now around the world they would tell you
Speaker 6: they're largely for shareholder value. You can talk about different
Speaker 6: constituents and so on, but I can tell you when
Speaker 6: we went to talk to German, French and other companies
Speaker 6: back in the early nineties, that was a novel concept
Speaker 6: for them. You know that it wasn't just about building
Speaker 6: a bigger and or prize, or surviving difficult times and
Speaker 6: just building great resilience. It was about, wow, you can
Speaker 6: actually focus on the goal of creating shareholder value. And
Speaker 6: that is what drove I think M and A and
Speaker 6: that M and A just kind of a virtuous circle
Speaker 6: drove more of that thinking.
Speaker 2: Tracy, I have to say, you know, like I've been
Speaker 2: so thoroughly enmeshed by the messianic message of shareholder value,
Speaker 2: I almost have like a hard time imagining a world
Speaker 2: in which companies don't perceive that, and governments and citizens
Speaker 2: don't perceive that as the mission to make the stock
Speaker 2: go up.
Speaker 3: Really Okay, well, here's my next question, and this is
Speaker 3: the reason why I kind of asked you about the
Speaker 3: post pandemic crisis. But it does feel like we are
Speaker 3: in a somewhat different world and we now have a
Speaker 3: president who I think everyone initially thought he was very
Speaker 3: pro business, and we saw stocks of a lot of
Speaker 3: smaller M and A boutiques go up, and stocks of
Speaker 3: a lot of larger banks go up after the election
Speaker 3: or around the election. They've since come down because a
Speaker 3: lot of the measures, a lot of the statements coming
Speaker 3: out of the Trump administration don't actually seem that business friendly.
Speaker 3: And we have reports, for instance, of Trump telling companies
Speaker 3: don't raise your prices too much to offset the tariffs
Speaker 3: because you know, it's a political liability for him. That
Speaker 3: seems to fly in the face of the mission of
Speaker 3: creating shareholder value. Is this a new regime?
Speaker 6: It certainly feels like a new regime. I think company's
Speaker 6: job is to try to figure out how can I
Speaker 6: create or maximizes the word often used shareholder value given
Speaker 6: whatever circumstances surround me, and those circumstances of both economic,
Speaker 6: and they're also political, and they're also regulatory.
Speaker 5: But I do think one.
Speaker 6: Of the reasons that you see but just really a
Speaker 6: remarkable amount of volatility right now. And you know, I
Speaker 6: said I wouldn't use this word, but I'll use it
Speaker 6: uncertainty that close, so.
Speaker 3: You made it about twenty minutes, twenty five minutes.
Speaker 6: It's clearly impacting markets. But you know, when I talk
Speaker 6: about in my book, sort of the dowblow of a
Speaker 6: thousand on I graduated college and it's forty thousand today,
Speaker 6: I mean forty times gain. And I do feel like
Speaker 6: a lot of that was driven by globalization. And I
Speaker 6: think if that was going to be reverse, sort of
Speaker 6: the untangling the strands of spaghetti that we've created in
Speaker 6: sort of the corporate world, I think is going to
Speaker 6: be very problematic. And that's why, you know, you hear
Speaker 6: things like I think Secretary best and the other day
Speaker 6: talked about how the current situation between the US and
Speaker 6: China is unsustainable. I think a lot of business people
Speaker 6: are thinking, yeah, it's unsustainable, and therefore they won't sustain it.
Speaker 6: Yes they will, they will back off, but I'm not
Speaker 6: sure that's going to happen. And nobody else is either.
Speaker 2: The bankers of these missionaries extolling the shareholder value mantra
Speaker 2: around the world. What was the previous belief system in
Speaker 2: place before that? If you're in a Germany, what is
Speaker 2: the role of a company that that your vision superseded?
Speaker 6: I think that in many parts of the world, and
Speaker 6: you know, even in America, really you had this sense
Speaker 6: of just sort of the corporational an entity of itself
Speaker 6: and had a life of its own, and its goal
Speaker 6: was just to perpetuate itself. You know, there wasn't a
Speaker 6: lot of M and A. I mean there was a
Speaker 6: you know, of course I mentioned I started my career
Speaker 6: at walk Taul Lipton, and you know, Marty Lipton, the
Speaker 6: founder of that firm, was such a great spokesman for
Speaker 6: this issue of the market for corporate control. That only
Speaker 6: when you had the discipline of the market that said, essentially,
Speaker 6: you're a CEO, you're a board, manage it however you want.
Speaker 6: But if you don't manage it well, your stock price
Speaker 6: will go down and we will buy you and then
Speaker 6: you will be out of jobs and we will take
Speaker 6: over and we will run it better than you do.
Speaker 6: And that market for corporate control created a discipline on
Speaker 6: companies that they had to try to maximize shareholder value
Speaker 6: because if they didn't do that, they would get bought.
Speaker 4: Yeah, green Hill got bought.
Speaker 3: Can we talk about that deal a little bit, because
Speaker 3: we've been meaning to do an episode on the sort
Speaker 3: of rise slash return of Big Japan I guess, and
Speaker 3: we've never quite gotten around to it. But obviously, you know,
Speaker 3: Mizuho coming in buying a company like Green Hill for
Speaker 3: I think it was five hundred and fifty five hundred
Speaker 3: fifty million. A lot of people were saying at the time,
Speaker 3: this is, you know, another big Japanese bank trying to
Speaker 3: make a splash in overseas markets. Maybe it's about the
Speaker 3: idea that given tensions between the US and China, there's
Speaker 3: going to be more opportunity for deal making by Japanese companies.
Speaker 3: There were all these sort of strategies attached to why
Speaker 3: this deal was being done. You were directly involved with it,
Speaker 3: I assume what was your interpretation of what was going on.
Speaker 6: The book certainly tells the story of the evolution of
Speaker 6: our industry. Again, going back, we were a pretty unique
Speaker 6: business for a long period of time. There were lots
Speaker 6: of the whole chapter, and there are about all the
Speaker 6: many firms that followed us, particularly once our IPO not
Speaker 6: only was the success, but quadrupled in't share price over
Speaker 6: the first eighteen months, so we worth two billion dollars
Speaker 6: and still not many more than one hundred people, including
Speaker 6: you know, the receptionists and everybody else.
Speaker 5: So the sector.
Speaker 6: Got more crowded, right, there were more players, And I
Speaker 6: thought what made our firm so successful at the beginning
Speaker 6: was we had a different strategy. And so you always
Speaker 6: have to think about what's the right strategy, not for
Speaker 6: the last five or ten years, but for the next
Speaker 6: five or ten years. And so having had many many
Speaker 6: opportunities to sell the firm over the years and really
Speaker 6: not showing any interest in any of them.
Speaker 5: I talk about a lot of.
Speaker 6: Them in the book. There are many of them that
Speaker 6: are spelled out there. But I never had any interests
Speaker 6: at all, really didn't even have much of a serious
Speaker 6: meeting with anybody. But you know, the Mizuho people, through
Speaker 6: an intermediary, approached me, and again I had no interest,
Speaker 6: took my typical stance, and I just started to rethink things,
Speaker 6: you know, coming out of kind of the latest pandemic crisis,
Speaker 6: you know, seeing the industry go through another difficult time. Also, frankly,
Speaker 6: you know my own personal situation. I mean, I thought
Speaker 6: about subtitles for the book that would be something like
Speaker 6: life cycles of Wall Street firms and the people who
Speaker 6: run them, because you know, we don't go forever either,
Speaker 6: And I thought, you know, for the next chapter of Greenhill,
Speaker 6: I think being part of a strong global international bank
Speaker 6: like Mazuha would be good. So six months after they
Speaker 6: said would you have a cup of coffee? I sent
Speaker 6: Mac a message through that intermediary saying yes, I would
Speaker 6: have a cup of coffee.
Speaker 2: If the purpose of a corporation is to create shareholder value.
Speaker 2: For a boot Seek investment bank, why do shareholders get
Speaker 2: to split the value? If you why even bring shareholders in?
Speaker 2: It's not a capital intensive business the people creating the margin.
Speaker 2: Why isn't it just run for the bankers? And actually
Speaker 2: this is a criticism in fact of like investing in
Speaker 2: investment banks. It's like, no, the bankers capture all the margin.
Speaker 2: Why even have shareholders?
Speaker 6: Well, here is sort of the dirty little secret of
Speaker 6: the IPO market, which is if you want to crystallize
Speaker 6: and collect shareholder value.
Speaker 5: A very good way.
Speaker 6: Of doing it is to take your company public. We
Speaker 6: were the first of our kind to do that. So
Speaker 6: ideas sort of came to me one summer when I
Speaker 6: was doing work for a client in an unrelated industry
Speaker 6: and I thought, I wonder if we could go public.
Speaker 6: We decided, if we had one more good year, we're
Speaker 6: going to do that. So on January second, two thousand
Speaker 6: and four, I called up Golden Sachs and others and said, hey,
Speaker 6: would you consider taking us public? And that's a great
Speaker 6: way to crystallize value, realize all I worked out great
Speaker 6: for our early founders. For sure, being a public company
Speaker 6: is not nearly as much fun as going public, you know,
Speaker 6: And in fact, I mentioned in the book part of
Speaker 6: my thought process when I ultimately decided that we would
Speaker 6: sell become part of Mizuho. You know, the number of
Speaker 6: publicly traded companies in America in the lifetime of our
Speaker 6: firm fell in half. And part of that is investment
Speaker 6: funds want to invest in bigger, more liquid stocks, and
Speaker 6: part of that is there's more regulatory hurdles to being
Speaker 6: a public company, and so it declined a lot. So
Speaker 6: sometimes people say to me, that really is difficult being
Speaker 6: a public company. Do you regret that? I'm like, no,
Speaker 6: I don't regret that because we all made a lot
Speaker 6: of money by going public, and by the way, I
Speaker 6: had a lot of fun as well, so that was
Speaker 6: all good. But I think for many companies, and the
Speaker 6: reason you often see companies go public, be public for
Speaker 6: some number of years, maybe get taken private by a
Speaker 6: private equity fund, and then what happens three to five
Speaker 6: years later, they take it public again, maybe in a
Speaker 6: slightly different form. So that's the kind of ying and
Speaker 6: yang of the IPO market, which is that it's not forever.
Speaker 6: You tend to do it for a period.
Speaker 3: Wasn't the argument. Also, if you're a partner at a
Speaker 3: boutique M and A for you have sort of equity
Speaker 3: in the business, some sort of partnership stake. But if
Speaker 3: you IPO, then you basically trade that illiquid equity for
Speaker 3: something that's public and quite liquid that you can monetize well.
Speaker 6: And even more so that's all true, but even more
Speaker 6: so if you were a partner of Gold and Sachs
Speaker 6: before it went public about five years before we did,
Speaker 6: when you retired or sold your effectively sold your shares
Speaker 6: back to the firm. You got paid out of book value.
Speaker 6: You know, the day at went public, I think think
Speaker 6: in public a like three times book or something like that.
Speaker 6: So suddenly overnight the value what you had tripled. You
Speaker 6: can read historyes of Gold and Sachs kind of like
Speaker 6: my book is a bit of a history of the
Speaker 6: industry and see some of the tension over the years,
Speaker 6: because you had generation after generation of partners who would
Speaker 6: reach retirement and get cashed out of book. And then
Speaker 6: along came one generation that decided, We're not going to
Speaker 6: get cashed out of book. We're going to do something different.
Speaker 6: And that's kind of the calculus we made as well
Speaker 6: at Greenhill. I mean, there was a long history even
Speaker 6: before our firm, of smaller boutiques that eventually got sold.
Speaker 6: They would sell out to a bigger bank, and I
Speaker 6: wanted to keep us independent. I thought we could go
Speaker 6: a long way and build a big global firm and
Speaker 6: all that sort of thing. And so I thought, really,
Speaker 6: one summer, I just thought, I wonder if instead of
Speaker 6: crystallizing value by selling the firm, I wonder if we
Speaker 6: could go public.
Speaker 2: Let's talk a little bit more about the contemporary environment
Speaker 2: and the prospect of deglobalization. The initial COVID supply shock
Speaker 2: obviously woke up a lot of countries at least in
Speaker 2: key strategic sectors or whatever, to have their own capacity.
Speaker 2: Then the war in Ukraine further dividing the world among
Speaker 2: multiple lines. Now the tensions with China specifically, but also
Speaker 2: maybe with every other trading partner, including Japan, And talk
Speaker 2: to us about like, what's emerging potentially from your perspective
Speaker 2: in the place of the ideology that you preached throughout
Speaker 2: most of your career.
Speaker 6: Yes, it is different change from just the kind of
Speaker 6: the pure shareholder value. We don't care where our plants are,
Speaker 6: we don't care where our customers are. We just want
Speaker 6: to have the right configuration to maximize shareholder value. If
Speaker 6: you or your government has to start thinking about, hey,
Speaker 6: maybe we want to have some of our own capability
Speaker 6: in that field, it really changes everything. I mean, here's
Speaker 6: a really simple example. If you are running a country
Speaker 6: that's in a climate that's not you know, the greatest
Speaker 6: place to grow food, you probably want to grow some
Speaker 6: of your own food. Nonetheless, you know, maybe more expensive,
Speaker 6: maybe more difficult, but you probably want to have some
Speaker 6: of your own supply. What's now being talked about is
Speaker 6: maybe that's true in a whole bunch of things. Maybe
Speaker 6: that's true of you know, pharmaceuticals. Maybe that's true of
Speaker 6: our defense products. Maybe that's true of all the electronics
Speaker 6: that were we all, you know, live with every single
Speaker 6: day of our lives. And if you start thinking that way,
Speaker 6: I think it will quickly lead to countries saying I'm
Speaker 6: not sure we want to allow this foreign company to
Speaker 6: buy our you know, wonderful company here, because if we
Speaker 6: will lose control of that production. And I think if
Speaker 6: you start to think broadly as a government, you could
Speaker 6: convince yourself that in almost every industry you'd like to
Speaker 6: have some of your own capability.
Speaker 2: I just you know, this came up on a recent podcast,
Speaker 2: But the administration recently talked about how much we import
Speaker 2: in textiles and clothing, and it's just like, this is
Speaker 2: not a strategic sector. Particularly, this is not a sector
Speaker 2: associated with high margins or high value jobs. So to
Speaker 2: Scott's point, Tracy, yes, countries could suddenly start to convince
Speaker 2: themselves that every sector of the economy needs to have
Speaker 2: domestic capacity.
Speaker 3: Why is the US not growing its own silkworm supply
Speaker 3: for bananas or bananas or mangoes or avocados. These are
Speaker 3: the big questions.
Speaker 5: We love guacamole in this country.
Speaker 3: Were avocados we do indeed? Okay, So if we're in
Speaker 3: a period of heightened protectionism slash deglobalization, what exactly should
Speaker 3: M and A advisories actually do the deal makers? Do
Speaker 3: you start focusing on restructurings instead. I know Greenhill did
Speaker 3: a lot of restructurings post two thousand and eight.
Speaker 6: Yes, a lot, almost really all the M and A
Speaker 6: advisory bootooks really added restructuring capability because you figured it
Speaker 6: out pretty early that when MNA is really slow, there's
Speaker 6: a lot of restructure going to be done this cycle.
Speaker 5: Though I'm not.
Speaker 6: Sure that it necessarily shifts into a lot of restructuring
Speaker 6: because it's not like the economy is that bad. And
Speaker 6: maybe it gets there, of course, but I think you know,
Speaker 6: what you're seeing in the statistics year to date certainly
Speaker 6: is that there has been considerably less M and A.
Speaker 6: I mean, somebody told me the last month some data
Speaker 6: was showing that it's like the slowest month and you
Speaker 6: know in many, many years, And so I think we're
Speaker 6: not yet in a period. I don't think of deglobalization,
Speaker 6: but we certainly are on the brink of one. And
Speaker 6: if the tariffs you know, really got solidified at significant levels,
Speaker 6: I think that would perhaps create some.
Speaker 5: M and A opportunities.
Speaker 6: I don't think as many as the under the old
Speaker 6: religion of free trade and shareholder value, but I think
Speaker 6: it'll create some. I mean you'll need you know, European
Speaker 6: companies that sell in the US might think, okay, we
Speaker 6: need to have manufacturing capability in the US to service that,
Speaker 6: and like vice versa, US into Europe and US and
Speaker 6: to other parts of the world as well. So there's
Speaker 6: always this n M and A banker. Again, whatever the
Speaker 6: rules are, you can find deals that make sense. The
Speaker 6: thing is, right now people don't know what the rules are,
Speaker 6: so they can't quite do that.
Speaker 2: How much is it simply rolodex knowing the person to
Speaker 2: call it, knowing the person to get the communication with
Speaker 2: someone else, And how much does that value compound over
Speaker 2: time such that of veteran deal maker has a sustainable
Speaker 2: edge over a junior deal maker simply by dent to volume.
Speaker 6: Certainly the role of decks or the electronic equivalent there
Speaker 6: always is very very important. I mean, if you think back,
Speaker 6: you know, it's interesting again about the evolution of the industry,
Speaker 6: which is so fascinating that was so small and became
Speaker 6: so big. You know, initially very few people were in
Speaker 6: the business, and a person like say Bob Greenhill found
Speaker 6: at our firm. I mean, he had a huge market
Speaker 6: share by himself. You know, I'm not talking Morgan Stanley's
Speaker 6: market share, like his market share, and there are a
Speaker 6: few other guys that had had sort of the same
Speaker 6: thing and they did everything. You know, today, we're doing
Speaker 6: a paper deal. Tomorrow, we're doing a computer deal. Day
Speaker 6: after that, we're going to do an energy deal. You know,
Speaker 6: what happened as the industry grew is that firms realize
Speaker 6: that to create a competitive edge and trying to win business,
Speaker 6: you should be a specialist. And at first they thought, okay,
Speaker 6: you're going to be a healthcare specialist, and then later
Speaker 6: that got broken down to well, that's not narrow enough.
Speaker 6: You've got to be either a biotech or a pharma
Speaker 6: or a healthcare devices or a hospital management expert. And
Speaker 6: so you create all these like subspecialties where people may
Speaker 6: not be a household name, they may not ever, you know,
Speaker 6: get their name in the Wall Street Journal or something,
Speaker 6: but they may be the leading m and a expert
Speaker 6: on a niche within healthcare, within technology, within industrials that
Speaker 6: builds a great business for them. So it's kind of
Speaker 6: a narrow but deep roll index people try to build.
Speaker 3: Now, speaking of household names and the Wall Street Journal,
Speaker 3: this is actually something that I wanted to ask you about.
Speaker 3: So when I first got your book, I immediately went
Speaker 3: to the index and I looked up every media organization
Speaker 3: name and then read what you said about Bloomberg coverage,
Speaker 3: Financial Times coverage, Reuter's coverage, and one line that I
Speaker 3: thought was interesting is you had a criticism of one
Speaker 3: of the news stories where you said that you know,
Speaker 3: it was a news publication that was making out that
Speaker 3: the departures of some of your bankers wore a bigger
Speaker 3: deal than they actually were. And you make the point
Speaker 3: that while outsiders can't really tell the difference between whether
Speaker 3: or not you know someone who's leaving is a huge
Speaker 3: deal in their industry or not, what advice do you
Speaker 3: have for financial journalists who are trying to figure out
Speaker 3: whether or not this particular guy is a big deal.
Speaker 3: Slash rain Maker in his particular.
Speaker 6: Niche Well, first of all, I was hoping you wouldn't
Speaker 6: go to the indexing work for your company. By the way,
Speaker 6: huge fan of Bloomberg, Thank you. You know the point
Speaker 6: I made. And a whole chapter is titled from a
Speaker 6: comment that was somebody made on Bloomberg once. But I
Speaker 6: think what I've talked about a lot in the book
Speaker 6: is is my relations and the firm's relations with the media.
Speaker 6: And you know, and on the way up, boy did
Speaker 6: they help us. I mean it was incredible the way
Speaker 6: they fed this sort of brand building and to kind
Speaker 6: of each story added to the luster and helped you
Speaker 6: in the next piece of business, and that piece of
Speaker 6: business got you another good story, and then it just
Speaker 6: was a beautiful, virtuous circle. But the media relationship gets
Speaker 6: more complicated as time goes on. You know, the media,
Speaker 6: I think sometimes has a tendency to both want to
Speaker 6: build entities or people up a lot, and then it's
Speaker 6: kind of really interesting if you can sort of tear
Speaker 6: them down as well. So, you know, I had my
Speaker 6: complicated relationships with the media, and I think it's hard
Speaker 6: for them to know from the outside. I mean, there's
Speaker 6: a whole as you well know, there is a whole
Speaker 6: industry of advisors out there who are trying to help companies,
Speaker 6: you know, to some degree, fool you right, to some degree,
Speaker 6: put the you know, the lipstick on the pig, to
Speaker 6: put the right spin on whatever happened yesterday, to make
Speaker 6: the quarter sound better than it probably was. So I
Speaker 6: think you've got a hard job.
Speaker 5: I mean, I think.
Speaker 6: Look, I think Bloomberg does it well, and so do
Speaker 6: some others FT. Wall Street Journal, et cetera. Do a
Speaker 6: nice job, but it's not easy to ferret through what's
Speaker 6: the real story on a quarter or an M and
Speaker 6: a deal or whatever news there is.
Speaker 3: Thank you, I appreciate that empathy.
Speaker 2: What do deals leak? What is the most common reason
Speaker 2: that a deal might leak to the media? Early, I
Speaker 2: don't understand why anyone talks to reporters. I'm very glad
Speaker 2: that some people seem to be willing to talk to
Speaker 2: the media, but I never really get it. I would
Speaker 2: never Why do deals leak and what is the most
Speaker 2: common source of leaks.
Speaker 6: That I'm happy to say is a mystery to me.
Speaker 6: Certainly they never leaked for me. Part of the argument
Speaker 6: going back to why the so called boutique investment banks
Speaker 6: did quite well for a long time. I mean, part
Speaker 6: of the pitch we made was if you care about confidentiality,
Speaker 6: wish every company does when they're kind of secretly hatching
Speaker 6: some deal is that if you have a small team,
Speaker 6: small firm involved, you're less like a have a leak
Speaker 6: and they have a big team, big firm involved. Sense
Speaker 6: And you know, we used to point out that, you know,
Speaker 6: if you imagine you know, the biggest, the Golden Sacks,
Speaker 6: the JP Morgan, Like, just how many compliance people would
Speaker 6: even have to hear about a specific deal before they
Speaker 6: got approval to lend the money, to give the advice
Speaker 6: and things like that, And so it's just a it's
Speaker 6: a numbers game in some way. But look, it's illegal
Speaker 6: to leak information on public deals, and it's surprising that
Speaker 6: somehow it happens. And of course there have been insider
Speaker 6: trading case as well, which is another form of abusing
Speaker 6: client information that you have proud to say, Greenhill, we
Speaker 6: never had an insider trading case, So I'm very pleased
Speaker 6: with that.
Speaker 3: Can I ask you a personal question?
Speaker 5: Sure?
Speaker 3: So there's a moment in the book where you talk
Speaker 3: about how you're fifty one years old and about to
Speaker 3: go on your first ever two week vacation, which is
Speaker 3: kind of shocking. What's work life balance like? Are you
Speaker 3: happy with the choices you made in your career? Would
Speaker 3: you advise young students to consider going into investment banking now?
Speaker 3: Is it better in terms of work life balance?
Speaker 5: I'm not sure it's better. I mean I feel that.
Speaker 6: Look, that story is true because I always felt like,
Speaker 6: especially in the firm's early years, I played a pretty
Speaker 6: central orl even before I was the CEO, because Bob
Speaker 6: Greenhill was the guy. I loved to do deals and
Speaker 6: didn't really like to manage. So I didn't feel like
Speaker 6: I could be away very long, and so I would
Speaker 6: take one week vacations. But now, I mean, personally, I
Speaker 6: feel like I've got good work life balance. But everybody
Speaker 6: has to work it out in their own way. I mean,
Speaker 6: you know, I'm married to the same woman for forty
Speaker 6: three years. That's got to say something. You know, I
Speaker 6: think I didn't miss any of my kids, you know,
Speaker 6: sports or other theater activities and so on, and you know,
Speaker 6: and probably at the peak, my wife and I saw
Speaker 6: maybe fifty Broadway shows a year.
Speaker 5: You'll know, that you see. You'll see many references to
Speaker 5: Broadway shows.
Speaker 2: There was there a client who came along or.
Speaker 6: In some cases but mostly but mostly us. You know,
Speaker 6: you just say, you know, so I found my work
Speaker 6: life balance. But the one balance I didn't have was
Speaker 6: like long vacations, because I just didn't feel like I
Speaker 6: could be away that long.
Speaker 3: Well, it's funny because even in that anecdote, you end
Speaker 3: up on a call. I think you went on safari to.
Speaker 5: Africa, on the coast of East coast Africa. There's no
Speaker 5: such thing.
Speaker 2: As a vacation when you're an adult and you have
Speaker 2: a job. I mean, I've taken no, no, no.
Speaker 3: The real vacation is when you take gardening leaf between jobs.
Speaker 3: If you're lucky enough to get that, that's when you
Speaker 3: can actually relax.
Speaker 2: This is the best time to change jobs. And iwa say
Speaker 2: this once. There's no such thing as vacation. If you
Speaker 2: have a serious job in a place you could maybe
Speaker 2: not look at your email for a few hours.
Speaker 6: Yes, can I just say one thing more about that?
Speaker 6: It's just another little anecdote, And boy is that true.
Speaker 6: I mean, and this is one of the things that
Speaker 6: ultimately gets you to think you know, maybe there's a
Speaker 6: life after this, and I should think that it is
Speaker 6: time to sort of respond to one of these increases
Speaker 6: to buy the firm. But you know, I also talk
Speaker 6: in there about you know what deal that we worked
Speaker 6: really hard on, fabulous deal, wonderful about to be announced.
Speaker 6: And you know, and I meant, like at the at
Speaker 6: the intermission of a play with my kids in the country,
Speaker 6: sort of rural Berkshire, you know, summer theater thing, and
Speaker 6: and you get this call that the thing died, I mean,
Speaker 6: and you have to by saying the book that you
Speaker 6: you know, your job then is like we don't ruin
Speaker 6: your family's day, you know, keep your game face on
Speaker 6: and just keep moving. But you know, you're right, the
Speaker 6: bad news can come at any minute. It can come
Speaker 6: at five in the morning when you just woke up.
Speaker 6: It can come and you're at the you know, the
Speaker 6: intermission of a of a show. It can come in
Speaker 6: the middle of vacation. And that's a bit the price
Speaker 6: you pay to be in this industry.
Speaker 2: In recruiting these days, for bankers, is it as important
Speaker 2: to say go to one of the best schools. You know,
Speaker 2: people think about where their kids are going to go
Speaker 2: and or like, you know, is it fine if someone
Speaker 2: goes to University of Indiana or University of Mississippi or
Speaker 2: something like that, Like how important is that pipeline? When
Speaker 2: you think about the industry today recruiting of young bankers, I.
Speaker 6: Think a good thing is that it has become much
Speaker 6: more democratic in terms of this opportunity from almost everywhere.
Speaker 6: I mean, you mentioned Indiana University actually haven't have a
Speaker 6: great undergraduate business school, and they've sent a lot of recruiteduation. No,
Speaker 6: but it used to be when I started out. I mean,
Speaker 6: I think at Morgan Stanley we recruited at very few
Speaker 6: schools under read or even fewer NBA schools, and and
Speaker 6: at green Hill was kind of the same way. But
Speaker 6: over time, and partly because the industry needed so much talent,
Speaker 6: you know, then you sort of started going to the
Speaker 6: big ten, and then you start going to the smaller
Speaker 6: liberal arts schools, and you start going to the Southeast schools,
Speaker 6: and and now I think young people who you know,
Speaker 6: who work hard, who take enough of the stems stuff
Speaker 6: to be able to do the math, to be a banker,
Speaker 6: they can come from almost anywhere and build a great career.
Speaker 3: So I think you told one of our fellow journalists,
Speaker 3: Sujit Endapp, who has actually been on this podcast as well,
Speaker 3: but you described your role on Wall Street as kind
Speaker 3: of like being Forrest Gump, so not necessarily the most
Speaker 3: important guy in the room, but someone who had a
Speaker 3: front row seat to all these really big moments in
Speaker 3: financial history. When I think of Forrest Gump, I think
Speaker 3: of how surreal a lot of those scenes are, and
Speaker 3: you know, Forrest Gump in the White House and things
Speaker 3: like that.
Speaker 5: With MLK and the Washington That's right, What.
Speaker 3: Was the most surreal moment for you looking back on
Speaker 3: it all?
Speaker 6: Wow, it's really hard to pick out one, I would say.
Speaker 6: I mean, it's funny I flippantly came up with a
Speaker 6: Forrest Gump line because, you know, because I think I'll
Speaker 6: tell you.
Speaker 5: I'll tell you.
Speaker 6: One thing I think got my career ahead is I
Speaker 6: didn't feel like I always needed to be the most
Speaker 6: important guy in the room, and so I was happy
Speaker 6: to let you know, Bob Greenhill's a generation old to
Speaker 6: me be a more senior, more important guy. And by
Speaker 6: the way, if you stay in the advisory business, I mean,
Speaker 6: your client should always be more important than you, so
Speaker 6: you have to kind of subordinate yourself to the CEO,
Speaker 6: the chairman of the board. I mean, you're whispering in
Speaker 6: the ear, You're giving them great advice. Often you're giving
Speaker 6: that advice to the whole board. But it's not all
Speaker 6: about you. You know, it's supposed to be about the client,
Speaker 6: subjective and so on. So, you know, lucky for me
Speaker 6: being at the firm i was at, I did end up,
Speaker 6: almost like Forrest Gump, being in an interesting spot for
Speaker 6: the dot com crash, the financial crisis, nine to eleven,
Speaker 6: the COVID. I mean, I sort of saw all those,
Speaker 6: and you know, I'm not sure what I would pick
Speaker 6: with the most surreal, But that's a that's a really
Speaker 6: good question, because there were a lot of them where,
Speaker 6: you know, where you just kind of can't believe you're
Speaker 6: you're there at kind of this critical, kind of pivotal
Speaker 6: moment during one of these crises.
Speaker 2: There is this backlash to globalization happening. There is people,
Speaker 2: there's on many levels, there's the security concerns. People feel
Speaker 2: a certain sense of sadness that like, you know, the
Speaker 2: local potato chip maker got bought and is now part
Speaker 2: of Free Too Lay or whatever, and that brand that
Speaker 2: they loved as a child, and like I get you know,
Speaker 2: these things that you describe which were sort of pivotal
Speaker 2: to this expansion of the global economy and so forth.
Speaker 2: Do you have any regrets or change of perspective on
Speaker 2: some of these questions over time about the sort of
Speaker 2: the zeal with which many people were spreading the shareholder
Speaker 2: value mission and the sort of perhaps understandable loss of
Speaker 2: like their local environment, what made their area distinct, et cetera,
Speaker 2: when you look back over it, what is your perspective
Speaker 2: on that?
Speaker 5: Look?
Speaker 6: I think an interesting book for somebody other than me
Speaker 6: to write would be where do we go next? In
Speaker 6: what I would call the whole transaction ecosystem? Because I
Speaker 6: know when I started out, I mean I talked about
Speaker 6: how the nineteen seventies, again I was a very very
Speaker 6: young person then was kind of a stagnant decade, really
Speaker 6: very little economic growth, very in the you know, stock
Speaker 6: market growth, et cetera. I think the country needed a
Speaker 6: real jolt of energy and activity and kind of a
Speaker 6: market for new shareholders to take over companies and run
Speaker 6: them differently. You know, at some point there's got to
Speaker 6: be diminishing returns on that and we now have this
Speaker 6: huge industry of lawyers and bankers to sort of do
Speaker 6: that kind of thing, and you know, I think it's
Speaker 6: a legitimate question should there be some constraints on that.
Speaker 6: So that's a question to be answered for the future.
Speaker 2: I think Scott Boch the book is Surviving Wall Street,
Speaker 2: a tale of triumph, tragedy and timing. Thank you so
Speaker 2: much for coming on Odd Life. That was fantastic, Thank you.
Speaker 5: I really enjoyed it. Thank you, Tracy.
Speaker 2: I really liked talking to Scott, and there's a lot
Speaker 2: in there, but just this idea of bankers as the
Speaker 2: missionary of a sort of shareholder value thinking about corporations
Speaker 2: and capitalism, super interesting thing to.
Speaker 3: Think about, absolutely, and coming with their talking points about synergy.
Speaker 2: Oh yeah, totally.
Speaker 3: The other thing I was thinking of.
Speaker 2: So economies of scale, that's right.
Speaker 3: One thing I hadn't considered.
Speaker 1: You know.
Speaker 3: He talked about how low share prices can be like
Speaker 3: a form of discipline on corporate management, because if you
Speaker 3: have a low share price, than someone's going to start
Speaker 3: eyeing you and going, well, we could just buy that thing,
Speaker 3: and then you're probably going to be ousted as management.
Speaker 3: I hadn't really considered that. But it is true.
Speaker 2: Yeah, no, it's totally true. And it's a hard constraint
Speaker 2: on the ability of any management team to prioritize anything
Speaker 2: of the shareholder value. So it's like, I'm sure you
Speaker 2: know they'ah like, well, we want to keep people employed
Speaker 2: in this country because we've always had a history in
Speaker 2: this country. Well, if that's not profitable, productive employment, it's
Speaker 2: going to be a drag on your stock price. And
Speaker 2: you create the opportunity for one of your competitors to
Speaker 2: buy you, and then they're gonna they who have no
Speaker 2: emotional resonance with this place, they'll do the hard job
Speaker 2: of laying off the workers. And I get why. You know, frankly,
Speaker 2: it's not surprising to me why there are individuals and
Speaker 2: businesses and politicians who want to curb that.
Speaker 3: It all comes down to incentives, doesn't it. That's really
Speaker 3: what drives everything. All right, shall we leave it there,
Speaker 3: Let's leave it there. This has been another episode of
Speaker 3: the Odd Lots podcast. I'm Tracyalloway. You can follow me
Speaker 3: at Tracy Aalloway.
Speaker 2: And I'm Jill Wisenthal. You can follow me at The Stalwart.
Speaker 2: Check out Scott's book Surviving Wall Street, A tale of triumph,
Speaker 2: tragedy and timing that's now out. Follow our producers Carmen
Speaker 2: Rodriguez at Carman armand dash Ol Bennett at Dashbot and
Speaker 2: Kilbrooks at Kilbrooks. For more Odd Loots content, go to
Speaker 2: Bloomberg dot com slash odd Lots, where we have a
Speaker 2: daily newsletter and all of our episodes, and you can
Speaker 2: chet about all of these topics with fellow listeners twenty
Speaker 2: four seven in our discord Discord dot gg slash odlog.
Speaker 3: And if you enjoy Odd Lots, if you like it
Speaker 3: when we talk about the life of an m and
Speaker 3: a banker, then please leave us a positive review on
Speaker 3: your favorite podcast platform. And remember, if you are a
Speaker 3: Bloomberg subscriber, you can listen to all of our episodes
Speaker 3: absolutely ad free. All you need to do is find
Speaker 3: the Bloomberg channel on Apple Podcasts and follow the instructions there.
Speaker 3: Thanks for listening
Speaker 4: In