Barbarians at the Gate (67 page)

Atkins immediately realized he couldn’t let Forstmann issue the release. It sent the wrong message to junk-bond buyers and to a banking industry already jittery about LBO debt and the possibility of anti-LBO
legislation. With just three days until the bidding deadline, this was no time to scare the banks. Forstmann could bow out, but Atkins simply couldn’t allow his departure to hinder the remaining two bidders.

Forstmann stuck to his guns, insisting that he had to let the world know he was bowing out on principle. Frustrated, Atkins pulled Hugel from a Combustion Engineering board meeting at the Intercontinental Hotel. “We have to get them to change this press release,” the lawyer said. “It looks really bad.”

Hugel felt he had bent the rules to allow Forstmann into the bidding in the first place, and, like Atkins, was embarrassed to find him withdrawing. “Our horse was dying,” Hugel would say later. “And,” Atkins added, “it was dying in public.”

Now Hugel himself locked horns with Forstmann. For hours they argued about the release. “I have to put it out,” Forstmann kept insisting. Forstmann Little had a reputation to protect, he repeated. Hugel laid down the gauntlet. If Forstmann wouldn’t bend to persuasion, maybe blackmail would work.

“What if I put out my own press release?” Hugel suggested.

“What do you mean? What would it say?”

“It’ll say you acted in a hostile and unethical way.”

“You wouldn’t do that.”

“Try me,” Hugel said. “I guarantee it’ll be in the newspapers the next day.”

The next morning Forstmann Little & Co. issued a terse, one-sentence press release, bowing out of the bidding for RJR Nabisco with nary a peep of explanation.

He scanned the document impassively. He could see the proposal was desperate, almost certainly too little, too late. “Vague” and “ephemeral” were words that leapt to his mind.

Atkins had hoped to avoid something like this. The five-page letter beneath the First Boston letterhead was a monkey wrench aimed squarely at the gears of his machine. With any luck, Atkins thought, it could be brushed aside. He had no way of knowing, of course, how difficult that would prove.

Setting the letter down, Atkins faced the assembled directors. “There’s something else we have to deal with here,” he announced.

From a warren of cluttered offices inside First Boston’s glass-sheathed Park Avenue headquarters, Wasserstein—paunchy, disheveled, shirttails flying—and the tall, erudite Perella became the takeover era’s first superstars. In virtually every major takeover battle of the 1980s—at Getty, DuPont, Gulf—their footprints could be found. The two men helped transform investment banking from a sleepy gentleman’s trade by introducing the hustling, cutthroat ethic flourishing on Wall Street today.

On a chilly Groundhog Day in 1988, after months of clandestine maneuvering, Wasserstein and Perella strode into First Boston’s executive offices and, reading from notes prepared by their lawyers, announced their resignations. As the pair walked out that morning, they left Wall Street’s largest and best-known merger department in disarray. More than twenty top First Boston deal makers—the cream of Wasserstein’s hand-picked crop—soon flocked to join the pair’s new start-up firm, Wasserstein Perella & Co. Many of First Boston’s best clients followed suit.

When Henry Kravis launched his unprecedented tender offer for RJR Nabisco, Bruce Wasserstein was seated firmly at his right hand. By then, every major Wall Street investment bank and a host of minor ones were noisily feeding at the trough of RJR Nabisco. Every firm, that is, except First Boston. Without Wasserstein, First Boston seemed destined to sink into obscurity. King Arthur had left Camelot, it appeared, and the Round Table was no more.

It sure seemed like a lousy time for a joust.

Small wonder competitors likened Maher to the captain of the
Titanic.
But the scramble to save First Boston was more than business to Maher. Besides being his bosses for a decade, Wasserstein and Perella had been Maher’s best friends. Their parting left him angry and confused; the intense competition that instantly sprang up between their two firms only added insult to Maher’s injury. Survival now meant daily skirmishes with men who had been his confidants for ten years. Beating their former superiors became the rallying cry of First Boston’s remaining deal makers.

Now, eight months after their resignations, Maher was desperate. His brief tenure had been marked by exhilarating highs and devastating lows—mostly lows—and it had all come down to this: First Boston was the only major investment bank not involved in the RJR Nabisco deal. It was worse than humiliating. Sitting on the sidelines during history’s largest takeover sent a dire message to every First Boston competitor and client. Maher suffered no illusions: His department’s future was at stake.

Coming just four days before the bid deadline, Maher’s proposal was a rank long shot. On Friday the special committee expected to receive fully financed offers, a task that had taken Kravis and Cohen weeks; First Boston hadn’t yet talked to a bank. But if it could somehow emerge with a piece of the action, Maher knew, he could rescue his department from its decline. If he failed, Maher had no doubt, he would be a laughingstock.

A chain-smoking New Englander, Maher was thought by some to be an odd choice to lead First Boston’s 170-odd merger specialists. He was neither a natural leader nor a cheerleader. His primary attribute was a steadiness that was the marvel of his colleagues. Some considered Maher a stoic, although he had a gentle, self-deprecating humor and was prone to rare fits of temper; close friends knew to avoid him when the vein in his jaw began pulsing. Thoroughly unpretentious—a rarity on Wall Street—he wore his hair slicked back in a power cut that looked out of place on his head.

Maher grew up a strapping, middle-class kid from central Massachusetts, his father the president of a local machine-tool maker. He had entered Columbia Business School in 1975 when the bicycle-parts maker where he was sales manager began to slide downhill, prodded by a massive recall of shaky handlebar supports. Later he joined First Boston, taking a spot in the infant merger department after a fast-track colleague turned it down as a dead-end job. He started one week after Wasserstein. In First Boston’s culture of gray flannel and maroon suspenders, Wasserstein, hair uncombed, constantly in motion, fascinated Maher. “I didn’t know who
this character was—I thought he was from another planet,” Maher would recall. “Bruce was just this rumpled mess.”

As their fame grew, Wasserstein turned to Maher so often for advice on personnel and conflict-of-interest questions he took to calling him “Mr. Judgment.” For his part, Maher was one of the few at First Boston who could get away with shouting at Wasserstein. Colleagues remember Maher stomping out of Wasserstein’s office from time to time, shouting, “You asshole!” at the top of his lungs. No one could make Jim Maher madder than Bruce Wasserstein.

For all Maher’s levelheadedness, Wasserstein never considered him a top-notch deal maker. To Wasserstein, Maher’s takeover tactics lacked decisiveness. Time was everything in big takeovers, yet he felt Maher hashed over strategies for hours, even days, before moving. So indecisive did Maher seem at times that, behind his back, Wasserstein and the others called him “Hamlet.”

It was inevitable that Wasserstein and Perella’s success would lead the pair into conflict with First Boston’s management. First Boston was headed by Peter Buchanan, a no-nonsense former trader who drove a station wagon and had lived in the same New Jersey house for twenty years. Many felt Buchanan had a hard time understanding Wasserstein and Perella’s fast-track world of Porsches and mansions in the Hamptons. By the summer of 1987, Wasserstein believed, with some justification, that he and Perella were First Boston’s most important assets. When Wasserstein pushed for First Boston to channel its efforts away from trading and into his merchant-banking domain, he ignited a powder keg. After an initial blowup with Buchanan and other senior managers, Wasserstein and Perella were, by fall of 1987, mulling the possibility of leaving. It was assumed their inner circle would follow.

With Perella pushing the idea and Wasserstein astride the fence, Maher became the leading voice against their departure. All winter he argued that Wasserstein owed it to himself, and to the investment bankers he had recruited, to stay the course. Privately, he feared Wasserstein wouldn’t take the time to properly administer a new firm. Maher also suspected that other members of The Group who didn’t have First Boston’s best interests in mind—Tom Hill and Eric Gleacher—were encouraging Wasserstein to make the break. A weakened First Boston, Maher knew, presented tremendous opportunities for its competitors.

For Wasserstein the final straw came in January 1988, when Buchanan,
revealing the results of a lengthy policy review, declared there would be no shift in the firm’s direction. Disgusted, he and Perella made up their minds to leave. For Maher the end came at a Japanese restaurant. Wasserstein and his closest advisers sat for hours debating the pros and cons of setting up their own firm when it happened. Wasserstein drew a line in the sand. “We’ve got to make a decision,” he said. “Who’s in?”

One by one, Perella, a bearded deal maker named Bill Lambert, and the circle’s fifth member, Chuck Ward, threw in their lots with Wasserstein and the new firm.

Maher didn’t pause. “I’m out.” He hoped his resistance would dampen Wasserstein’s enthusiasm for the idea. It didn’t.

“Well,” Wasserstein said, after more discussion, “we’re going off to get a drink and talk about this.” Nobody said anything, but it was clear Maher wasn’t invited.

“Well,” Maher said, “keep me informed.”

“Well,” Wasserstein responded. “You’re out of it.” The words stung like a slap. It was as if eleven years of friendship had been forgotten. It was exactly the kind of thing Maher had come to expect from Wasserstein, a painful example of why he wouldn’t follow the two stars into a small firm. Maher would stew over the remark for months to come. “A typical Brucian move,” he would term it later.

Chuck Ward had tried one last argument to persuade Maher. “You got to come with us,” he had argued, only half in jest. “You’re the only one around here who can control Bruce.”

When Wasserstein and Perella handed in their resignations that February morning, Maher sat in his forty-third-floor office cleaning out his desk. If Maher wouldn’t start anew with his friends, neither did he have any interest in picking up the pieces they left behind. First Boston’s merger effort
was
Wasserstein and Perella. It was nothing before they arrived. And when they left, Maher feared, it would be nothing again. Maher didn’t know what he would do. But he couldn’t stay around these offices any longer.

Maher was pondering a resignation letter when Pete Buchanan called. First Boston’s chief came right to the point: He wanted Maher to take Wasserstein’s place and lead the firm’s investment-banking arm, including the merger department. Buchanan pushed all the right buttons, appealing to Maher’s loyalty and to his guilt at leaving behind aimless colleagues. Maher thought it over for a couple of hours. All around him,
chaos reigned as news of Wasserstein and Perella’s departure spread; he had to move fast to prevent permanent damage. He called his wife. Then, taking a deep breath, he accepted Buchanan’s offer.

It had been worse than Maher dared fear. Immediately, more than a dozen of First Boston’s leading deal makers followed their mentors to their new firm. Every day for weeks, it seemed, another of Maher’s friends walked into his office, resignation in hand. It amounted to a full-scale assault on the department they had built over the last decade. Maher fought back with the usual office morale builders: Friday afternoon beer-and-pretzel parties, scattered pep talks, T-shirts. (“Just say no” to Wasserstein Perella & Co.) For weeks he worked eighteen-hour days, pleading with veteran bankers and young stars not to abandon ship.