Bruce Wasserstein: Shy deal-maker who pioneered hostile M&A

published 23 October 2009

For a 'barbarian' worth more than $2bn, Bruce Wasserstein, chief executive and chairman of investment bank Lazard, had a fairly low-key lifestyle. He had expensive homes in New York city and the Hamptons, but he wasn't one to "spend his evenings... amid New York's glitterati", as The Daily Telegraph put it.

And his personal appearance his yo-yoing weight, a dress sense often described as 'crumpled' were ill-at-odds with the stereotype of the suave, designer-labeled banker. Indeed, says James Quinn in The Sunday Telegraph, he was "shy to the point that he would often not speak to employees in his own lifts if he didn't know them".

Yet Wasserstein, who died on Wednesday 14 October at the age of 61, was among the most ruthless deal-makers Wall Street has ever known. He pioneered the hostile takeover in the 1980s, and "reshaped the mergers and acquisitions (M&A) business into a high art", says The New York Times.

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Over his career, Wasserstein was credited with having a hand in more than 1,000 deals worth more than $250bn in total. His best known was advising private-equity group Kohlberg Kravis Roberts on its $31.5bn takeover of food and tobacco conglomerate RJR Nabisco in 1989 (see below). The deal was not surpassed in value terms until 2006.

What made him so successful? The clue was in his detested nickname 'Bid-'em-up Bruce'. Wasserstein didn't just act as adviser on mergers. He would actively push chief executives to pounce on weakened rivals, and take on big risks and debts to secure their prize.

If clients wavered, he would encourage them, "stroking their egos with what became known as his 'Dare to be Great' speech", says The New York Times a pep talk where he would argue that for a firm to become a global player, its boss would have to be bold and "pay the price".

An academic prodigy, Wasserstein graduated from the University of Michigan aged 19, then attended both Harvard Law and Business schools, before coming to Britain on a fellowship to study merger law at Cambridge.

He practised law for a short while before joining investment bank First Boston. He and long-standing business partner Joseph Perella made their names in M&A there, before leaving in 1988 to set up their own boutique investment bank Wasserstein Perella.

Of course, M&A is notorious for destroying shareholder value, and while Wasserstein was the toast of the banking industry, he was also "the bane of many investors who found their interests sacrificed by empire-building executives", says Rob Cox on Breakingviews.com. When merger fever abated in the early 1990s, his deals were found to have left companies "soggy with debt and operationally doomed".

Many consigned him to "history's dustbin", says Karl Taro Greenfield in Portfolio magazine. Yet Wasserstein's best deals those he cut for himself came "well after his reputation was in tatters". In 2000, he sold Wasserstein Perella to Dresdner Bank in 2000 for $1.6bn, pocketing $600m.

In 2002, he joined Lazard, and after a high-profile struggle with then-chairman Michel David-Weill, took the bank public in 2005, raising $855m in the process.

Once asked why he kept working so hard, he said: "I never considered the alternative. That's who I am." Perhaps as a result, he had a turbulent personal life. His first three marriages ended in divorce; he married his fourth wife Angela Chao earlier this year. He had seven children including the adopted daughter of his Pulitzer Prize-winning playwright sister, Wendy Wasserstein, who died in 2006.

Wasserstein's most notorious deals

Bruce Wasserstein is perhaps most famous for KKR's 1989 bid for RJR Nabisco. The deal was made notorious by the bestselling book Barbarians At The Gate, by investigative journalists Bryan Burrough and John Helyar.

Of the $31.5bn purchase price, $30bn was funded by debt at the time, the largest leveraged buyout ever. KKR managed to win a bidding war against a buyout proposed by RJR's CEO Ross Johnson. KKR then had to mount a rescue capital injection, though it eventually made a profit. Wasserstein walked away with a $25m fee.

Wasserstein's first major deal was in 1981. Oil group Conoco was finalising a merger with fellow oil company Cities Service Co when both drinks group Seagram and rival oil giant Mobil launched hostile bids for Conoco. Then chemicals group DuPont, advised by Wasserstein, joined the bidding. It bet correctly that its offer was more likely than Mobil's to get past the competition authorities, and succeeded in completing what was then the biggest takeover $7bn in corporate history.

Other deals guided by Wasserstein included food and tobacco conglomerate Philip Morris's $13bn purchase of food group Kraft in 1988. At the time of his death, he was advising Kraft Foods' $16bn current unsolicited takeover of UK chocolate-maker Cadbury.