Finance: INVESTMENT BANKING
LAZARD GETS A CROWN PRINCE--SORT OF
Has David-Weill really anointed Steve Rattner his successor?
For twenty years, Michel David-Weill has run the New York, London, and Paris Lazard houses with an iron fist. His charming Old World style camouflages his reluctance to share power. And the 64-year-old billionaire has no reason to, since Lazard is a private company and he is its controlling shareholder. But David-Weill has a problem: There is no one to carry on for him. His four daughters have shown no interest in the business. His son-in-law, Edouard M. Stern, once a potential heir apparent, left the firm in April to pursue his own business. And 68-year-old Felix G. Rohatyn, who was the firm's most famous rainmaker, retired on Apr. 30 after he was nominated as the U.S. Ambassador to France.
Finally, on May 22, David-Weill anointed his successor at Lazard Frres & Co., the New York firm. Well, sort of. Journalist-turned-investment banker Steven Rattner, 44, was promoted to the ambiguously titled position of deputy chief executive. Is Rattner the firm's heir apparent? "Until things exist, they don't exist," David-Weill says obliquely. "He certainly is in line for that responsibility [of chief executive]."
MORE DEMOCRACY. Nevertheless, Lazard partners in New York believe that Rattner's elevation marks the passing of the baton to the next generation and a new era not entirely dominated by David-Weill. Along with Rattner, four Lazard partners were promoted to vice-chairmen, all to serve on a newly formed management committee. The purpose: more democracy. Says Rattner: "Michel will be a little less the emperor and a little more the president."
Founded in New Orleans in 1848 by three French brothers, Lazard has been slow to change. Two seismic events triggered recent changes. First was the departure of Rohatyn. He had a powerful hold on the firm due to his ability to generate a big portion of its profits. Other bankers had to live in his shadow.
Concerned about replacing Rohatyn's rainmaking abilities, David-Weill talked to investment banker Bruce Wasserstein about joining Lazard earlier this year. Stigmatized in the 1980s for being too aggressive, Wasserstein still attracts high-profile clients. The deal died, partly because Lazard partners were furious that Wasserstein might eclipse their chance for a place in the sun. "They went crazy. There was enormous resentment," says a former partner.
David-Weill's solution was to promote Rattner. The son of the head of a paint-manufacturing company, Rattner was raised in Great Neck, N.Y. After graduating from Brown University, he worked as a New York Times reporter for eight years. Deciding he was as smart as the people he was covering, he joined Lehman Brothers Inc., then quickly moved to Morgan Stanley & Co., where he began the firm's media investment-banking practice.
In 1989, Rattner jumped to Lazard and worked on major deals, such as the sale of Paramount Communications Inc. to Viacom Inc. in 1994. "He's extremely creative, he's smart, and he's down to earth. He doesn't fit the mold of a stuffy investment banker," says Martin Davis, who worked with Rattner as the former head of Paramount. Rattner also advised on the $11 billion sale of Continental Cablevision to U S West in 1996 and on the sale of Ziff-Davis to Forstmann Little & Co. and its resale to SoftBank Corp.
Rattner says his biggest job will be changing the culture from every man for himself to a team approach. He wants to get the firm's capital-markets, investment-banking, and asset-management businesses in New York working together. Lazard partners are known to fight for business as much with their colleagues down the hall as with competitors. And he must mesh the New York, London, and Paris Lazard houses, which are separate entities. "There have been a lot of divisions within the firm. I'd like to think now that's over," says one of the four new vice-chairmen, Damon Mezzacappa.
Rattner also must modernize Lazard's anachronistic management. Many decisions were made based on ad hoc conversations between David-Weill and Rohatyn. The solution will be a strong management committee to run the firm. "Under this new structure, we can make some meaningful improvements," says Kendrick R. Wilson III, a new vice-chairman.
Some former Lazard insiders, though, think that David-Weill is simply testing Rattner. "Michel owns this firm. He runs the firm any way he wants," says one naysayer. But even David-Weill can't rule forever.By Leah Nathans Spiro in New York