Barons of the Big Deal

Raymond J. McGuire maintains his cool despite the billions of dollars on the table. Even the slightest miscalculation could be disastrous, but that doesn’t faze him. Like a chess grandmaster, he’s planned ahead for every contingency with a meticulousness that would make Garry Kasparov envious.

At stake: the $21 billion buyout of wood and paper processor Georgia-Pacific Corp. by privately held Koch Industries Inc. Wichita, Kansas-based Koch is offering $48 per share to Georgia-Pacific stockholders for a total of about $13.2 billion in cash. The remainder of the deal’s value is Georgia-Pacific debt, which Koch will assume. Citigroup Inc. was retained as Koch’s sole financial advisers, and McGuire, who was appointed managing director and co-head of global investment banking in July 2005, is leading the investment banking team.

McGuire firmly believes the marketplace undervalued Georgia-Pacific and that the buyout price represents a premium of nearly 40% of its stock — a handsome profit for Georgia-Pacific shareholders that should cement the deal. Having an M.B.A. and a law degree from Harvard, he quickly grasps the potential legal and antitrust challenges, allowing him to head off any potential legal pitfalls.

While this transaction marks a milestone as one of the largest such deals headed by an African American, McGuire is simply elated that the deal (completed in 2005) went down without a hitch. After all, he followed his own advice about the way to get what you want from a negotiation: “One, is to be completely prepared. Two, is to anticipate each potential tactical move. Three, assume that the people on the other side of the table are equally as smart. Four, keep perspective. And five, recognize there’s no margin for error.”

McGuire is a perfectionist, no doubt. As an investment banker who’s managed to not only stay in the game but play at its highest levels, anything less than perfection is unacceptable. William M. Lewis Jr. knows this too. As managing director and co-chair of investment banking for Lazard, Freres & Co. L.L.C., an international financial advisory and asset management firm with $88 billion in assets, Lewis has his own share of blockbuster deals. Lewis made his mark in 1989 with his achievement of two simultaneous firsts — becoming the first black partner at Morgan Stanley and accomplishing that feat in seven years — the fastest promotion to partner ever at a financial services firm.

At Morgan Stanley, Lewis’ department accounted for more than $2 billion in revenues. Over the span of his career, his deals include the $720 million acquisition of Envirodyne Industries Inc. by Emerald Acquisition Corp. in 1989, the $355 million sale of Moog Automotive to Cooper Industries in 1992, and the $1.79 billion sale of Maytag to Whirlpool in 2005.

Lewis moved over to Lazard in 2004, where he was named managing director and co-chairman of investment banking. It wouldn’t take long before he made a name for himself. In 2005, mergers and acquisitions revenues at Lazard increased by 40% to $674.5 million.

Interestingly enough, the two have been friends for more than 30 years, having met at Harvard back in 1975. Even then, McGuire observed that Lewis was driven to succeed. “I would say he was smart and had a seriousness of purpose,” McGuire says of his colleague.

Lewis, like McGuire, knows how to get the deal done. “The size of deals and the complexity of transactions Lewis worked on very much reflects his effectiveness and his ability and the fact that clients are very loyal to him and know that if they come to him, he’s going to get the deal done,” explains William Wright, a managing director at Morgan Stanley.

With a slew of deals under his belt in a career that spans a quarter century, the Richmond, Virginia, native has built a reputation as a dealmaker extraordinaire. Despite this, he downplays his significance on the Street. “There’s nothing that we do that is all that complex — it just isn’t. We’re not doing brain surgery over at New York-Presbyterian Hospital,” he asserts. “We’re not sending people out into space on the space shuttle. This is not that tough of a business. So people should just peel away the mystique from around it.”

Despite Lewis’ protestations, the situation remains that investment banking does carry a mystique, in part because of the sheer scale of the deals typical of the industry. Investment banks, such as those run by Citigroup and Lazard Freres, serve as advisers for corporations involved in mergers, acquisitions, and other strategic transactions and assist public and private companies in raising funds in the capital markets (both equity and debt). The deal-making process is often one of intense pressure as each person is judged not only by his or her character but by what they’ve accomplished — as measured in dollars. Did you negotiate fair but lucrative acquisition terms? Was it the right decision to advise the client to walk away from the bargaining table? Critical analysis skills are but one of the weapons in an investment banker’s arsenal. Unshakable nerves are another. After all, the greater the risk involved in a deal, the greater the reward. The difference between the right move and the wrong one could mean millions of dollars.

At the pinnacle of this ultracompetitive industry are McGuire and Lewis. These two veterans have outperformed their competition to rise to the peak of their professions. More over, their mentoring, guidance, and leadership have helped usher in a new generation of top-notch talent on Wall Street. Many, if not most, of the individuals on BLACK ENTERPRISE’s 75 Most Powerful African Americans on Wall Street list attribute their personal success to the influence and lessons learned from these deans of the financial markets.

The significance of McGuire and Lewis is underscored by the testimonials offered by some of the most influential African Americans on Wall Street. “I had the opportunity to work with Lewis probably two or three years into my career and I learned so much by watching how he handled clients, how he got to the key issues, and how he was very effective in building their confidence,” says Carla Harris, managing director of global capital markets at Morgan Stanley. “I used the tools that I learned watching him as I went forward in my career.”

Shawn D. Baldwin, chairman and CEO of Capital Management Group (No. 10 on the BE

INVESTMENT BANKS list with $10.8 billion in total managed issues) was inspired by McGuire’s acumen. “Most bankers have to call legal if they have this idea for a transaction, because they don’t know the legal ramifications. He already knows the legal ramifications because he’s such a good lawyer,” says Baldwin. “So it speeds up his ability to get a deal done. He’s able to simplify and streamline a transaction faster than most other bankers on the Street.”

William Wright, a managing director at Morgan Stanley who worked with Lewis at the financial services giant, is grateful for the pearls of wisdom provided by the veteran. “Bill was very much a mentor, very much someone who gave you career advice and guidance,” Wright says. “You could go into his office at any time and he’d help you sort things out. Working on a deal with him wasn’t merely about doing the transaction; he was trying to teach you how to do more and take on more responsibility on the deal.”

LEWIS: LEADING OTHERS TO THE STREET
For Lewis, it’s not about the fancy cars, lavish lifestyle, and all the things that money can buy. Despite his wealth, he remains modest and is reluctant to discuss his deals and accomplishments. What motivates him is the knowledge that he is a role model to younger people in the industry. He doesn’t shun that responsibility; he embraces it. One of his goals is to see more African Americans involved in the fin

ancial markets. In addition to providing sage wisdom, he lead
s by example, for instance, by pushing for the creation of scholarship programs for students at historically black colleges and universities who are interested in working on Wall Street.

Lewis says that one of the barriers keeping African Americans from the financial markets is lack of exposure at an early age. “If the first time you’ve really heard about investment banking is many african americans on wall street have lewis to thank for their success.

when you are a junior or senior in college, the game is sort of over because the vast, vast majority of the kids have heard about investment banking — my kids have heard about investment banking — since they were babies,” says Lewis. To that end, he travels to schools such as Spelman College, Morehouse College, and Florida Agricultural & Mechanical University. “We put programs in place that allowed us to identify kids when they are sophomores so that by the time they were seniors they had worked on Wall Street, they had heard the lingo.”

Lewis’ advice is often no-nonsense. There’s little hand-holding — there’s no time for that in the fast-paced world of finance. But the golden rule is simple: get the results and you’ll excel. “You either got the assignment right or the project right or you did the analysis correctly or you did the trade correctly, or you didn’t,” he says. “Wall Street, I believe, comes the closest to being a meritocracy, where at the end of the day, by and large, people are evaluated and rewarded based on merit.”

There’s no doubt that Lewis rose to the top on his merits. “He

has knowledge of the financial markets, finance, and transactions to the extreme. He’s extremely knowledgeable — among the top in the country of all the appropriate financing techniques and advice for executives and their corporate entities,” says George Van Amson, managing director of institutional equities at Morgan Stanley.

Lewis joined Morgan Stanley as a financial analyst in 1978. After taking a break to get his M.B.A. from Harvard, he returned to Morgan Stanley as an associate in 1982. By 1989 he was elected a managing director, becoming the first African American to do so. Between 1994 and 2004, Lewis was head or co-head of each of Morgan Stanley’s origination and execution businesses.

Though Lewis is as personable and charming as you might expect of a Southern gentleman, don’t let the cool demeanor fool you. One has to be competitive to succeed in this business, and Lewis is no exception. Brian Leftwich, vice president of investment banking at Merrill Lynch, recalls the first time he played golf with Lewis in South Hampton, New York, years ago. At the time, the young associate was nervous about playing golf with his boss. Leftwich wanted to make a good impression, so he woke up at 5:00 a.m., giving him plenty of time to make the 8:00 a.m. tee time. But he got lost, was five minutes late and arrived just in time to see Lewis ready to tee off without him. “He paired me up with somebody else. I proceeded to shoot a 71, which is a really low round.” Once Lewis found out what a solid golfer Leftwich was, he partnered with him on the course the following day. “So, he had no problem pushing me off on someone else, until he found out how good I was. Then he said, ‘You’ll be with me, we’ll play them tomorrow.'”

MCGUIRE: THE SCIENCE OF THE DEAL
For McGuire, it’s not the size of the deal that matters. He gives the same energy and level of analysis to deals in the millions as he would for those in the billions. “You know, he’s an M.B.A. and a J.D.,” points out Baldwin. “So he picks a deal apart from both sides — the business side and the legal side — and that’s what gives him the edge.”

McGuire received his B.A., cum laude, from Harvard College in 1979 and his M.B.A. and J.D. from Harvard Business School and Harvard Law School, respectively, in 1984. His career on Wall Street began that same year in the mergers and acquisitions group of First Boston Corp. When top officers Bruce Wasserstein and Joseph R. Perella left First Boston in 1988 to start their own firm, Wasserstein, Perella & Co., McGuire, along with a select group of managing directors, joined them. McGuire remained with the company until 1994, when Merrill Lynch successfully lured him over to help build their M&A business. He worked at Merrill Lynch until 2000, when he joined Morgan Stanley.

As global co-head of mergers and acquisitions for Morgan Stanley, McGuire spearheaded a number of deals including the $19.8 billion sale of Nabisco Holdings to Philip Morris. He also executed a range of domestic and international financial advisory

transactions, including takeover defense, merger restructuring, acquisition, and divestiture mandates. At the time there was an exodus of senior executives due to an ongoing battle between then-CEO Philip Purcell and a group of dissident investors and former executives. In May 2005, McGuire was recruited to Citigroup. Purcell resigned shortly thereafter.

McGuire is now responsible for 2,000 employees and billions of dollars in revenues. The only African American on Wall Street who commands a larger staff is Stanley O’Neal, the CEO of Merrill Lynch. But McGuire understands that with great power comes great responsibility, and part of that responsibility includes helping African Americans who are coming up behind him. Among them is Robert Reffkin, a former investment banking associate at Lazard who is currently a White House Fellow. “I first sent McGuire an e-mail when I was in school, asking for his advice on how to pursue investment banking. He responded about three weeks later. It must have been the middle of the night,” recalls Reffkin. “To me, that was better than responding immediately. It shows me that when a young person is seeking advice, he will always respond, even when he’s too busy and must do it on his own time.”

Not that he has much free time. He frequently flies to Europe and Asia, managing senior client relationships and analyzing the next strategic transaction. “The way you get to be in the Hall of Fame is to outperform the competition on a regular basis,” McGuire says. “It’s the same with deals. And the responsibility of leading the team is with me.” When the deal between Georgia-Pacific and Koch was announced the following trading day, Wall Street reacted positively, and Georgia-Pacific stock gained 36% on the news. Such power comes with the territory when you’re brokering deals at this level. Not only are McGuire and Lewis moving markets, they’re helping to ensure that there are more African American market movers in the pipeline for years to come.
Additional reporting by Tennille M. Robinson & Stephanie Young

RAYMOND J. MCGUIRE,Managing Director and Co-Head of GlobalInvestment Banking, Citigroup
Age: 49
Hometown: Dayton, OH
Education: Received his M.B.A. and J.D. from Harvard Business School and Harvard Law School (1984) and a B.A., cum laude, from Harvard College (1979)
Experience: Prior to joining Citigroup, McGuire was global co-head of Mergers & Acquisitions at Morgan Stanley; managing director in the Mergers and Acquisitions Group of Merrill Lynch & Co. Inc.; and one of the original members of Wasserstein, Perella & Co. Inc., where he became a partner/managing director in 1991. He started his career in 1984 in the Mergers and Acquisitions Group of The First Boston Corp.SELECTED DEALS

Year	Transaction	Value
2005	ConocoPhilips Co. acquisition of Burlington Resources	$35.6 billion
2005	Koch Industries Inc. acquisition of Georgia-Pacific Corp.	21.0 billion
2004	Colgate-Palmolive acquisition of GABA	CHF 1.05 billion*
2003	Pfizer sale of Schick to Energizer	930.0 million
2003	Phat Farm sale to Kelwood Holdings	150.0 million
2002	Unilever sale of DiverseyLever to S.C. Johnson	1.75 billion
2001	Nabisco Holdings sale to Philip Morris Cos.	20.0 billion
2001	Nabisco Group Holdings sale to RJ Reynolds	9.8 billion
1998	Jefferson Smurfit acquisition of Stone Container Corp.	6.5 billion
1989	Georgia-Pacific acquisition of Great Northern Nekoosa Corp.	3.75 billion

 

*Swiss Francs

William M. Lewis Jr.Managing Director an Co-Chairman of Investment Banking, Lazard Freres
Age: 50
Hometown: Richmond, VA
Education: Graduate of Harvard College (1978) and Harvard Business School (1982)
Experience: Before joining Lazard in 2004, Lewis worked at Morgan Stanley in several capacities over his 24-year tenure: co-head of the firm’s Banking Group, co-head of its Global Mergers and Acquisitions department, and head of its Real Estate Banking and Private Equity businesses.

SELECTED DEALS

Year	Transaction	Value
2005	Sale of Maytag to Whirlpool	$1.79 billion
1993	Sale of American Tourister to Astrum International	68 million
1992	Sale of Moog Automotive to Cooper Industries	612 million
1989	Acquisition of Wilson Sporting Goods by Amer Group	200 million
1989	Buyout of Environdyne by Emerald Acquisition Corp.	720 million
1989	Buyout of Coleman by MacAndrews & Forbes	545 million
1987	Acquisition of Children’s World by GrandMet USA	Â
1986	Acquisition of Hammermill by International Paper	1.1 billion
1986	Acquisition of AMF by Minstar	545 million
1979	Buyout of P.R. Mallory (Now Duracell) by Dart Industries	252 million