Finance: INVESTMENT BANKING
ROGER ALTMAN HITS THE STREET RUNNING
He's carving out a niche as an elite strategic adviser
Nine months ago, Peter R. Kann, the chairman and chief executive of Dow Jones & Co., was deliberating on corporate strategy. Under pressure from critical shareholders to get the stock price up, Kann faced a tough decision: what to do with Dow Jones's troubled financial wire service, the former Telerate, now Dow Jones Markets, and WBIS+, a New York television station.
As the well-connected CEO of the company that publishes The Wall Street Journal, Kann could hire any investment banker on Wall Street for advice. In the past, Kann had turned to top firms, including Goldman, Sachs & Co. But a year ago, Kann met with Roger C. Altman, an investment banker Kann knew from Altman's days at the Blackstone Group. Altman had returned to New York after serving as Deputy Treasury Secretary from 1993 to 1994. Kann ended up hiring Altman's fledgling boutique, Evercore Partners Inc. and consulted closely with Altman and his colleagues. Kann and the board decided to keep Dow Jones Markets and sell WBIS+.
"I was looking for outside help, and I thought, why not try Roger," says Kann. "They've become real strategic advisers, not just people you bring in to accomplish a particular task."
Roger Altman is back in business. After leaving Washington under a Whitewater-related cloud, the personable, well-regarded financier is reestablishing himself in New York. Leveraging his extensive investment banking experience prior to his Washington post, Altman has signed on a handful of experienced bankers and lined up a roster of elite assignments, including advising Westinghouse on its $5.4 billion purchase of CBS in 1995 and helping IBM with strategic financial issues. Evercore has also raised $400 million for a leveraged buyout fund from the likes of Chrysler and Equitable.
It's a solid start--and Evercore is doing it by bucking the conventional wisdom. Consolidation is the rage on Wall Street, driven by the theory that bigger firms with more offerings can better serve clients. But Altman is betting that small is beautiful. He believes there is a dearth of bankers who focus on giving disinterested advice in the manner of Felix G. Rohatyn, Lazard Freres & Co.'s just retired eminence grise. "The role of senior adviser, someone who is objective, who can say, `Don't do it, that's foolish,' is largely gone," says Altman.
Evercore is also trying to squeeze into the overheated LBO business. Copying the Blackstone Group, Evercore plans to do LBOs in partnership with corporations. To help on such specialized deals, the firm has signed on six high-profile, unpaid advisers, including sitting chief executives--and Evercore investors--such as George M.C. Fisher at Eastman Kodak Co. and Gerald M. Greenwald at United Airlines Inc. One Evercore adviser, Michael H. Jordan, CEO of Westinghouse, says he can act as a sounding board and occasionally refer a deal. "If I run across a situation, I may suggest they talk to Evercore, but I'm not actively seeking them out," he says.
Altman's recent tenure in Washington went less smoothly. At Treasury, the ambitious Altman was considered a leading candidate to succeed Lloyd Bentsen as Secretary. Altman, 50, is a longtime friend of Bill Clinton from their Georgetown University days. But as acting chairman of the Resolution Trust Co., Altman was raked over the coals. Some senators investigating Whitewater accused him of misleading them about whether he tipped off the White House about a criminal investigation of a failed Arkansas thrift with ties to Clinton. Altman resigned in 1994. Subsequent investigations cleared him of any criminal or ethical misconduct. Altman declined public comment.
That, apparently, has not hurt Altman in the eyes of his longtime clients. Says USX Corp. Chief Financial Officer Robert M. Hernandez: "He'll do very well. He's got lots of integrity, and he's a first-class individual." Altman has joined forces with David G. Offensend, 43, who has worked for investor Robert M. Bass's Acadia Partners since 1990; Austin M. Beutner, 36, a Blackstone banker who since 1994 has headed the U.S. Russia Investment Fund; Walter T. Dec, 54, a senior General Motors pension official and investor in LBO funds; and Jeffrey Sechrest, 41, former head of mergers and acquisitions at Lehman Brothers Inc. Evercore plans to grow from 9 to 25 bankers by late 1998. "We're trying to create brand equity in the Evercore name," says Offensend.
Some Wall Street competitors, though, are skeptical about the extent of their experience when it comes to the tricky LBO business. Evercore's private-placement memorandum says Altman, Beutner, and Offensend were responsible for some 16 deals in their days at Blackstone Group, Lehman, and Acadia, which chalked up an annualized internal rate of return of 49%, before the LBO firm's cut.
Yet on Wall Street, it's very difficult to determine who really deserves credit for the successful deals. For instance, in the Six Flags Corp. LBO in 1991, Altman's relationship with owner Time Warner brought in the deal but "he was not ultimately responsible for execution, monitoring, or exit," says the memorandum. Altman says that finding good deals is the hardest part and that the partners have been conservative in describing their involvement. Further, 11 of the 16 LBOs that the partners take credit for date to the 1980s, when easy leverage made it far easier to earn high returns than in today's tougher environment.
It will take at least five years to find out whether Evercore's LBO batting record matches its prestigious pedigree. But Evercore's extensive contacts in the corporate world should allow it to generate plenty of M&A advisory business and LBO opportunities.By Leah Nathans Spiro in New YorkReturn to top