The last tycoons: the secret history of Lazard Frères & Co (106 page)

Around this time, Bruce's marriage to Lynne began to deteriorate. "First of all, he was my first real boyfriend," she said. "I'm very attracted to brains and Bruce has brains. And when you put the brains to courting somebody, it's wonderful. And it was great for many years--well, not many years, for a long time, but what happens is, at least with Bruce, if you have a different point of view from him, then you're either stupid or ignored. He is not flexible. It's his way or, as someone said, the highway. You take it for a while, but then you say, 'Wait a minute. I'm a person in my own right. And I'm not competing, but you have to pay attention to me in a positive way.' He'll tell you himself that he's a very hard person to live with." There were two catalysts for their marital troubles. First, Lynne explained, even though she and Wendy were quite friendly for a time, she was not happy with the way Wendy depicted her in her play
Any Woman Can't,
which was produced off-Broadway in 1973. Lynne had been interested in rock collecting, and Wendy portrayed her as sitting on a carpet, playing with rocks as if they were marbles. "So she was making fun of my rocks, which I thought was stupid," she said.

Soon after watching the play, the couple had a fight while they were working on their tax forms. "We were doing taxes, and Bruce wanted me to be at home, like the wifey, you know, the at-home person," she said.

But if we were out, he would introduce me as a jewelry designer, as someone who made jewelry, like I made rocks. I mean, we're not talking high-end here, okay? And Bruce would never balance his checkbook, and in fact he often wouldn't even write down the checks. He wanted me to do that. He wanted me to do a lot of work on the taxes. I exploded, saying, "You're the one with all the damn degrees. You do it." And one thing led to another. We'd had problems and he refused to go to counseling, and I didn't know enough to know that I could get a divorce without his permission. I wanted to get counseling. I wanted to get further therapy, and he said, basically, "I'm not going to do that. If you don't like it, leave." So I left. I didn't realize I could maybe negotiate. But Bruce was such a forceful person and I'm not. I have character and integrity and all that, and at some point you say, "Enough." We'd been unhappy. I'd been unhappy for a while. He wasn't, I was. But he didn't pay attention to it.

After being separated for eighteen months, they were divorced in August 1974.

There were no children. She got a total of $3,000 from him, which she used to help put herself through Columbia Business School. She worked for a long time at AT&T before being let go. She now earns extra money by selling used books on Amazon, using the moniker "Wasser-Kill." She has spoken to Bruce only once since they were divorced, as they were both approaching their fiftieth birthdays. Much to her disappointment, she never remarried.

IN THE FALL
of 1976, Joseph Perella, a thirty-one-year-old accountant from Newark, New Jersey, was in charge of First Boston's fledgling M&A department, of which he was the only member. The same week First Boston announced Perella would be running the M&A department, Felix was on the cover of
BusinessWeek
, busy resurrecting his badly tarnished reputation. "I remember reading about all the fees he had collected working on deals," Perella said later. "I was so impressed. I said, 'God, this is really a great business to be in...'I was very impressed by seeing Felix Rohatyn on the cover of
BusinessWeek,
and I said to myself, 'Well, you know, someday if I work hard, I'll be on the cover of a magazine.'"

In the fall of 1976, Combustion Engineering hired First Boston to help it buy Gray Tool, then the subject of a hostile offer. Combustion was to be the white knight, the friendly suitor that would rescue Gray Tool. To help out, Perella called Sam Butler at Cravath. Cravath was available and took the assignment. At the first meeting with Combustion, Butler showed up with his associate Bruce Wasserstein. "I don't think I was at the meeting more than twenty minutes before Bruce had virtually taken charge," Perella recalled. "He was telling everyone the way the deal should be done from the lawyer's standpoint, and I said to myself, 'Holy mackerel, this guy is unreal.' It was one of those moments in life where I knew I had met a rare individual. Bruce had the ability to take what he knew about the law and translate it into action that was going to accomplish the client's objective." Combustion won Gray Tool. Within a year, Perella had offered Bruce a job doing M&A with him at First Boston. He doubled Bruce's salary to $100,000. By November 1977, the pair had completed two deals that combined brought in $3 million in fees, a fine haul in those days. They were on their way.

At Perella's urging, in April 1979 Wasserstein joined him as co-director of the M&A group. This was not the last time Perella would provide the grease for Bruce's career advancement. A few years later, Perella returned from a vacation and decided to turn over day-to-day management of the M&A group to Bruce.

At the time, First Boston was evolving into one of the most aggressive of the few Wall Street firms that provided merger advice to their clients (the others being principally Lazard, Goldman Sachs, and Morgan Stanley). First Boston's unprecedented success came from its guerrilla-like approach to deals. With very few establishment clients of its own, the firm became known for its ability to break up the deals of others using superior tactics (thanks in large part to Bruce) and, over time, to allow its balance sheet to be used by the LBO mafia to shake up corporate America. Leading the charge in this take-no-prisoners strategy was the powerful combination of Wasserstein and Perella, the Jewish bully with the studied rumpled appearance and the patrician Italian former accountant.

"When the M&A effort at First Boston seriously began in the late 1970s," Bruce later wrote, "we questioned how to crack the Lazard-Goldman-Morgan oligopoly. The solution was simple: Find the holes in the market, and then raise the stakes by outprofessionalizing the competition." Perella sought out and promoted Bruce because he knew he was brilliant and knew on some level that he needed Bruce's genius to succeed himself. By 1981, First Boston's nascent M&A department was on a major roll, having helped Bache & Co., the securities firm, elude a hostile takeover by finding the friendly suitor Prudential Insurance. The firm also helped keep St. Joe Minerals Corporation out of the hands of Seagram.

The breakthrough deal for the First Boston M&A department came in 1981, when Bruce and Joe advised DuPont on its successful $7.6 billion acquisition of Conoco, holding off in the process aggressive bids from both Mobil and Seagram, which Felix represented. "The structure of the deal was so complex that it earned the nickname 'Big Rube,' after the convoluted machinery drawn by the American cartoonist Rube Goldberg," the
New York Times
reported.

Although the idea was not new, Bruce's insight was to use a coercive two-part tender offer in the largest M&A deal in history. Bruce advised DuPont to offer cash at a premium to the Conoco shareholders tendering early, while leaving those who failed to tender with DuPont stock of undetermined value instead. The strategy, of course, was to get voting control of the company quickly by offering shareholders a high price in cash for their shares and penalizing those who did not tender. The tactic worked, and DuPont was able to win Conoco. The press coverage of DuPont's win was breathless, with Bruce as the genius and mastermind. In its own way, the canonization of Bruce as the tactical insurgent was the precise complement of the lionization of Felix as the ultimate insider.

Bruce had, literally, written the blueprint for the strategy some three years earlier. In
Corporate Finance Law: A Guide for the Executive,
published in 1978, he penned one of the first and most comprehensive handbooks on the arcane rules, regulations, and tactics of public financings, takeovers, and acquisitions. One section included a detailed overview of how to wage a takeover battle using tender offers. In another, Bruce wrote about the role of antitrust laws in mergers and took a dig at his former mentor Ralph Nader and the very observations he had himself made before he went to Wall Street.

Bruce was still only a
vice president
at First Boston when he wrote the book--on weekends and on vacations--and was thirty years old when it was published. Not only was the book--which he dedicated to his second wife, Chris, a tall, thin, red-haired psychotherapist--exactly what it set out to be, a useful guide for corporate executives, but it was also an exceedingly clever advertisement to them of the professional skills of its author: Bruce Wasserstein, experienced deal practitioner and former lawyer who understood the complex legal nuances of deal tactics. "Warning: In corporate financial transactions, ignorance of the law can be costly," the book's jacket proclaimed. "Whether you are working on deals as an executive, corporate director, banker, attorney, broker or accountant, you must understand the legal ramifications to be effective."

In his introduction, Bruce made the world of deals seem as exciting and as dangerous as war and a battleground not to enter unprotected. "The deal business is unfortunately replete with dangerous minefields," he wrote. "Hurtling roughshod over the intricate layers of governmental regulations is a prescription for disaster. The trick is to tiptoe lightly and not get blown up. Disciplined creativity, a very precious commodity, is required. It has sometimes been said that a bad lawyer is one who fails to spot problems, a good lawyer is one who perceives the difficulties, and the excellent lawyer is one who surmounts them. As J. P. Morgan is said to have remarked about his attorney, Elihu Root, 'I have had many lawyers who have told me what I cannot do. Mr. Root is the only lawyer who tells me how to do what I want to do.'" Bruce was both a lawyer and a banker who could tell his clients at First Boston how to do what they wanted to do. Furthermore, while younger than his colleagues, he was one of the first Wall Street lawyers to switch successfully to banking from law (leading a wave of other lawyers who followed suit) and thus ushered in the era of investment bankers skilled not only in valuation but also in legal nuance and tactics.

Bruce's skills were nearly the opposite of, say, Felix's. Felix was long on client relationships, reputation, and deal wisdom. He left the lawyering to the lawyers. Bruce, shorter on diplomacy, public profile, and deal experience, relied instead on his brilliance and encyclopedic knowledge of merger law. Sometimes he openly questioned the advice M&A lawyers were giving their clients. Although this rankled, he knew how to get things done in the context of the existing restraints, and he refused to be told something couldn't be done when he had an inkling it could.

In his physical demeanor, too, Bruce could not have been more different from the typical star investment banker. Somewhere along the way--some say as early as Cravath--he decided deliberately and with great skill to turn his bloated, disheveled, nerdy appearance into a distinguishing and memorable professional asset. "He has great ambition and great confidence," said someone who knows him well. "He knows how to cultivate his personal demeanor. That sort of studied sloppiness is very deliberate. He likes people thinking of him as Einstein or the Nutty Professor."

The Bruce brand got a boost in May 1980 when the
New York Times
economics columnist Robert Metz devoted his entire column to Bruce's views on whether the use of hostile tender offers was due for a renaissance. That anyone would care what a thirty-two-year-old, newly minted managing director at First Boston thought about this subject is a testament to Bruce's precociousness. But the Metz article also marked the beginning of Bruce's constructive and symbiotic relationship with the press, one of the most important assets of the late-twentieth-century investment banker. Felix had it. Steve had it. And Bruce Wasserstein, the former executive editor of the
Michigan Daily,
had it, too. They all used the media to advance their own interests.

In April 1982, the
Wall Street Journal
published a lengthy front-page article on Bruce and Joe. The article added to the studied mythology of Bruce as the disheveled, overweight Einstein--this time with
red
hair (a year before the
Times
described Bruce as "heavy-set and blond")--and Perella as his sartorially splendid foil. "Wasserstein is best at figuring out what a client should do and Perella is best at getting the client to do it," a competitor observed. The
Times
referred to them as the "Simon and Garfunkel of the merger and acquisition business. They are a poet and a one-man band; the abrasive but brilliant tactician and the immensely likable supersalesman with one major product on his shelf: Bruce Wasserstein." "I'm one of those people who needs a crisis to be at my best," Bruce told the paper, adding that conceptualizing a new takeover defense was "like playing chess where the rules change after every move." The reporter did allow a few anonymous digs into the piece. He described what "some say" was Bruce's "overweening ego." An unnamed competitor, though, seemed to be scratching his head in wonderment. "Bruce is a genius," the head of M&A at a competing firm said, "but when I see some of the companies he has put together, I wonder if he has even a shred of common sense."