The Last Tycoons: The Secret History of Lazard Freres & Co.
By William D. Cohan
Doubleday, 752 pages, $29.95
If you’re looking for the definitive, judiciously balanced and heavyweight history of Lazard Freres, the legendary and reclusive investment banking house, you’ll have to wait. “The Last Tycoons: The Secret History of Lazard Freres,” by William D. Cohan, isn’t it. It is a pretty comprehensive chronicle of the last four decades of the 160-year-old firm, written in breezy and highly readable journalistic style by a former investment banker at Lazard.
Nevertheless, for those of us who enjoy high-level gossip (most people) and an inside look at the machinations, triumphs, failures and foibles of some of Wall Street’s and America’s most exalted personages, Cohan’s book is entertaining and seductively engrossing. His flow of language, format and diction is very much in the style of New York Magazine and Vanity Fair. Add a dash of Spy Magazine for the exotica and erotica (who was sleeping with whom, and the required size of “Hello’s” and air kisses at Elaine’s and the 21 Club), and you’ve got an addictive read.
What is missing in “The Last Tycoons” is a thoughtful examination of the historical and economic context of Lazard’s defining role in the evolution of investment banking over much of the post-World War II period in New York, Paris and London. This, at least in my view, should be the important focus, rather than the constant description of personal ambition, hubris, backbiting, jealousy, infighting, political shenanigans, art collections and la dolce vita in haut monde.
Many years ago I asked my senior partner at Wertheim & Co., Joseph Klingenstein, whom he thought was the greatest man he had ever known in his long career on Wall Street. To my surprise he immediately responded: “Andre Meyer. No one else is close.”
Klingenstein, a man of nearly infallible personal judgment and stern rectitude, would have known: He was the most successful investor in the history of Wall Street. Andre Meyer was a close friend, competitor and associate in numerous private-equity deals. In Klingenstein’s view, Meyer was the visionary financial pioneer who almost single-handedly revolutionized the investment-banking business in the postwar period when corporate demand for capital and acquisitions was soaring but investment-bank capital was still constrained by the ravages of the Depression. All the great firms were partnerships, and many were single-family controlled.
Cohan also points out that Meyer perfected the strategy of providing high-level corporate advice and arranging third-party financing without principal risk to the investment bank itself. And most importantly, he knew how to be well-paid for the services rendered.
During the salad days of Lazard Freres in the 1960s and early 1970s, Felix Rohatyn was the brilliant and superbly talented implementer of the concepts Meyer developed. Indeed, Rohatyn, Meyer’s protege, becomes the main character in “The Last Tycoons,” and deservedly dominates most of the book. (Nevertheless, I wish Cohan could have spent more time examining the dynamics of the remarkable symbiotic relationship between the great creative visionary and the peerless man of action. My personal recollection of Rohatyn, when I was a midlevel acquisition analyst at ITT Corp. in the mid-1960s, is one of total competence and attentiveness.)
Meyer’s template served Lazard and Wall Street well until the mid-1970s, when a conflation of countervailing factors, long in the works, came to a sudden head. The explosion of institutional trading volume, the advent of mega-mergers and acquisitions, the introduction by the Securities and Exchange Commission of deregulated commission rates, computer-packaged investment products and the ever-growing global flow of funds forced an abrupt paradigm shift (staunchly resisted by the ancien regime). Investment banks now had to provide larger amounts of their own capital to finance deals friendly and hostile, make public offerings of stock and debt, and inventory large blocks of stock — as well as give advice. Banking firms were compelled to broaden their capital bases through public ownership or from other sources. The death knell had already begun to ring for the firms whose prosperity depended largely on historical relationships and the intellectual capital of what Cohan calls a few Great Men.
Meyer died in 1976 after a long illness. Rohatyn, the peerless dealmaker, had no interest in running the firm. The burden of taking up the reins of management, and the reign of power as well, fell on Michel David-Weill, scion of the controlling family of Lazard Freres et Cie in Paris. David-Weill intellectually recognized the need for sweeping adaptation to the rapidly changing environment, but was viscerally and culturally wedded to Lazard’s traditional, small-is-better and Great Man theory of banking. As a result, successive efforts, originally blessed by David-Weill, of Steve Rattner, a brilliant Lazard dealmaker, and Bill Loomis, another high-level partner, to effect a sea change in the firm culture and operations came to naught (and created a lot of unhappiness and dissension in the process).
Eventually, before the firm totally unraveled, it was necessary to bring in an outsider who carried none of the insular Lazard baggage. To have a shot at succeeding, the individual had to be as strong, ruthless and determined as Andre Meyer. David-Weill chose Bruce Wasserstein, founder of Wasserstein Perella and a brilliant, single-minded and superbly aggressive investment banker. “Bid ’em up Bruce,” as Wasserstein is known on the Street, was also famous for his unswerving pursuit of self-interest.
Wasserstein got the job done in a restructuring that culminated in an initial public offering in 2005. During the restructuring process, the tumbrels rumbled routinely through Wall Street carrying decapitated members of the Lazard nobility who were either forced out or simply quit. Unhappily, one of them was David-Weill. He should have known that only one great colossus (at a time) can bestride the world of Lazard Freres.
Remarkably enough, despite all the machinations, selfishness, betrayals and bloodlettings, the leading Great Men of Lazard served it well: Meyer, Rohatyn, David-Weill and Wasserstein all made a crucial contribution when the times demanded it. In 1965 there were more than 25 important banking firms in the U.S. Only a half-dozen remain, and Lazard Freres is one of them. In the pit-bull investment-banking community of 2007, a prosperous survival is no mean achievement.
William Cohan has invested an immense amount of labor in research for “The Last Tycoons.” It is filled with anecdotes, statistics hidden in the files of the Justice Department and the SEC, interviews, legal documents and corporate records. He has performed a notable service for future scholars of investment banking.
Still, it seems to me he could have focused a bit more on how Lazard successfully responded over a century-and-a-half to the changing dynamics of investment banking and the corporate business world. If he had spent less time on the personas, peccadilloes and lifestyle of a few highly visible individuals, “The Last Tycoon” might have been the definitive text on Lazard Freres — although it would have been less engaging as summer reading.
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E. William Smethurst Jr. is a managing director of Byram Capital Management and previously a partner of Wertheim & Co. He was also an acquisition analyst at ITT Corp. in the mid-1960s, during the acquisition heyday of President and CEO Harold Geneen.
