Barbarians at the Gate (68 page)

Even as Maher battled on that front, Wasserstein laid siege to First Boston’s gilded client list. Many hired his new firm, including Time Inc. and investor Ronald Perelman. Gleacher and Hill offered their condolences even as their aides phoned Maher’s bankers with job offers and sought his biggest clients with predictions of First Boston’s impending decline.

It was inevitable that the turmoil at First Boston would take its toll on the firm’s performance in a hectic merger season. In an odd way, it had initially worked to Maher’s advantage. He was wounded badly enough, competitors reasoned, to do something desperate, a possibility that had to be factored into any confrontation with a First Boston client. Tom Hill knew it. Shearson’s merger chief, representing Black & Decker in a hostile tender offer for American Standard that spring, had been surprised to find Maher leading a last-minute rescue mission. A First Boston client, Kelso & Co., topped the Black & Decker offer and agreed to acquire American Standard. Hill’s client had to decide whether to fight or retreat. “Knowing Jimmy’s problems, it was clear to me they would stay with it,” Hill said. “The deal meant an awful lot to First Boston.” After sizing up Maher’s resolve, Hill advised his client to bow out of the bidding. For Maher’s shell-shocked troops, it was the first tangible sign there might be life after Wasserstein.

First Boston hadn’t fared so well in other fights. Maher’s Chicago office threw up defenses for an Illinois grain company, Staley Continental, only to see them quickly battered down by a British suitor’s hostile bid. One crisis followed another: In June, Maher’s entire LBO group quit to form its own firm.

The low point was First Boston’s defense of one of its oldest clients, Koppers, that spring. Maher met Beazer’s tender offer, orchestrated by Tom Hill, with a spirited defense. His twenty-seven-year-old restructuring whiz, Brian Finn, pieced together a complex defense plan involving the sale of Koppers’ businesses to three separate companies. But Koppers’ board rejected the plan as too iffy, and caved in to its suitor.

Each night Maher trudged home to his Riverside Drive apartment, exhausted. Few besides his wife and four children saw the signs of his strain. Through it all, Maher was outwardly calm. He remained the department’s most sought-after father-confessor, “the pier where everybody’s boat wanted to tie up,” as one friend put it.

Sniping by his new competitors only made matters worse. Commenting on First Boston’s string of takeover losses, an anonymous Wasserstein aide told
The Wall Street Journal
that summer, “When we were there, you’d never see things like that…. But nobody at First Boston seems to care as long as the fees keep rolling in.” Maher exploded. His best friends were accusing him of selling out. A senior Maher aide, Kim Fennebresque, fired back. “Wasserstein Perella & Co., although a fine firm, is basically a one-product firm,” he told
Investment Dealers Digest,
suggesting that its thirty bankers worked to create “the impression that Bruce is really working on [all clients’] deals.” (Fennebresque knew the term
fine firm
would rankle the Wasserstein contingent. “In investment banking,” he explained, “that’s like saying she doesn’t sweat much for a fat girl.”) For his comments, First Boston colleagues pounded Fennebresque on the back as if he had made a last-minute touchdown.

The response to Fennebresque’s remarks was immediate. Maher fielded a call from irate Wasserstein aide Chuck Ward. “Can’t you control your own people?” Ward demanded.

And so it went. At one point, a bogus memo to First Boston’s junior bankers, purportedly from Wasserstein Perella’s Ward, circulated at First Boston. Laced with sarcasm, its clear intent was to persuade First Boston bankers not to defect to the new firm. “There are lots of important bags to carry over here and not many bag carriers to go around,” the memo said, adding that applicants were advised to bring along mouthwash, knee pads, and Vaseline. “If you need to ask why,” it continued, “you haven’t figured out how things work around here.”

By fall, while First Boston could point to continued lofty rankings among Wall Street merger advisers, morale was sinking. To fatalists First
Boston remained an embittered polyglot of Wasserstein castoffs, a group of second teamers destined to sink to Wall Street’s lower tiers. Seven months after its founders’ departure, the department’s pipeline of deals-in-the-works was drying up, and competition for new business meant daily combat with the emerging clout of Wasserstein Perella.

Fennebresque, the thirty-seven-year-old banker in charge of attracting new business, became one of Maher’s closest confidants. A glib, Waspy lawyer, Fennebresque’s impish sense of humor served as a counterweight to Maher’s sternness. By fall Fennebresque felt the department had become “a rudderless ship.” “There had to be a chance for us to do something dramatic,” Fennebresque recalled. “Our captain hadn’t encountered rough seas yet. There was concern whether we had the depth we needed.”

Then on October 17 came the stiffest blow to First Boston’s merger effort since announcement of Wasserstein’s departure. Philip Morris’s $11 billion tender offer for Kraft, the largest offer of its kind in history, not only startled the corporate world. In choosing Wasserstein Perella as its sole adviser, Philip Morris also landed a haymaker to the jaw of its former banker, First Boston.

Jim Maher was in his office interviewing a job candidate a few minutes before six o’clock that afternoon when a headline crawling across the computer screen beside his desk caught his eye.

“
PHILIP MORRIS LAUNCHES BID FOR
…,” the Dow Jones News Service headline paused.

“Oh, no,” Maher said to himself. “Oh no…Oh no…” For several paralyzing moments, his eyes riveted to the screen, Maher prayed the headline signaled only a minor acquisition.

Then came the full headline: “
PHILIP MORRIS LAUNCHES BID FOR KRAFT.
”

“Oh…fuck.”

The pain Maher felt was more than knowing First Boston was being excluded from history’s largest unfriendly transaction. It was more than being upstaged for the umpteenth time by Wasserstein. To Maher Philip Morris’s rejection of First Boston was an acute, personal insult: The tobacco giant was his account. Maher had personally overseen Philip Morris’s 1985 acquisition of General Foods. As it sunk in that Wasserstein had snatched one of his largest clients, Maher knew he had only himself to blame. He had worked so hard to keep the department together
he had neglected his other responsibilities. It was a body blow to the entire department, a reminder that First Boston could no longer count on its best clients for business.

Maher dialed Ehud Houminer, a top Philip Morris executive he knew well. He strained to hold his temper. “Ehud, you know, this is a real kick in the balls.” Houminer made soothing noises but offered no promise of future work. It was the same with every Philip Morris executive Maher called that week.

Maher immediately convened a meeting to draw up an attack plan. Like every other investment bank on Wall Street, First Boston aimed to get a piece of the action, most likely by representing the special committee or a buyer for a major product line. Anything, in short, that might produce a fee.

Over the next few days, hundreds of calls were placed to potential buyers of RJR Nabisco assets. At first Maher didn’t worry that First Boston was left out of the mounting drama. Something was bound to break. RJR seemed so big that dozens of companies would hire investment banks to analyze acquisition strategies. Rolling up his sleeves and chain-smoking Marlboros, Maher hit the phones.

He first checked to see if First Boston might represent RJR’s board, but Lazard and Dillon had already been hired. He called Tom Hill. Did Shearson need more capital for their buyout? Hill said no. Maher called Ted Forstmann and Geoff Boisi. Neither man offered encouragement. Door after door slammed in Maher’s face.

The day after Johnson’s announcement, some of Maher’s old hands were already grumbling. Late Friday afternoon, Gary Swenson wandered into Fennebresque’s office. Swenson was a twenty-year First Boston veteran with a Midwestern sobriety that Fennebresque, a Long Islander, found irresistible.

“You know, we’re missing the goddamn boat on this deal,” Swenson said.

“What do you mean?” Fennebresque asked.

“Everybody on Wall Street has a horse in this thing except us. We’re the only ones not involved. We’re getting passed by, I tell you. I know what we need to do. Let’s put a group together and do it ourselves. Buy the whole thing. It’s just what this place needs. It could really turn this place around.”

At first Fennebresque dismissed the idea. It was just too big, too crazy. But as Swenson talked, Fennebresque found his enthusiasm catching. He called in several bankers, including David Batten, a veteran First Boston executive ending his first week in a new post in the merger department.

Batten shared Swenson’s concerns. Arriving four days earlier from the firm’s London office, he recalled finding “a palpable lack of self-confidence in the air.” Batten told his colleagues, “What this place really needs is a shot in the arm. Goddamn it, we’re still at the top of the heap. We can accomplish as much as anyone.”

The group brainstormed in Fennebresque’s office. First Boston could call in its Swiss affiliate Credit Suisse, they reasoned, and the two firms’ London joint venture. Together the three firms could canvas the globe looking for money and assemble a bidding group. They owed it to themselves to try.

Fennebresque got excited. He phoned Maher, who walked down from his office. Fennebresque laid out their plan. Did Maher think it could work?

Maher pondered the idea for a moment. “I wouldn’t object to that,” he said.

Fennebresque found the response, so typical of Maher, maddening.
I wouldn’t object to that? What kind of reaction is that? This is a great idea!
It was exactly the facet of Maher’s personality his friend found so exasperating. How many times had Fennebresque pleaded with Maher to stand on a desktop and give a stirring speech? The enthusiasm just wasn’t in him.

Fennebresque roped together a group and began telephoning LBO buyers who might be interested in forming a consortium to bid for RJR Nabisco.

For Maher’s closest advisers, the Philip Morris assignment was especially sweet. It held out the prospect of spoiling Wasserstein’s coup on the Kraft bid while gaining a share of the RJR Nabisco battle, all in one fell swoop. “This is great!” enthused Fennebresque. “It fucks Bruce on Kraft. It fucks Bruce on RJR. It preserves our relationship with Philip Morris. And it gets us into the RJR deal. Beautiful!”

Fennebresque’s group, meanwhile, was having little luck assembling the consortium Maher envisioned building around Philip Morris. Fennebresque had met several times with aides of billionaire investor John Kluge, but the talks went nowhere: Disclosure of Johnson’s management contract had lent the deal a patina of greed from which Kluge recoiled.