Wasserstein's M&A 101


The Battle for Control of America's Leading Corporations

By Bruce Wasserstein

Warner 820pp $30

The rehabilitation of Bruce Wasserstein has not been quick or easy. The mergers-and-acquisitions maven hit his nadir in 1989, when he landed on the cover of Forbes under the headline "Bid-'em-up Bruce." But the perception of Wasserstein as an overaggressive investment banker who won hostile bidding wars by getting clients to overpay faded with time. And he has kept a low profile during much of this decade.

In February of 1997, however, he grabbed the spotlight again when he served as adviser to Dean Witter Discover & Co. in its merger with Morgan Stanley & Co. In early 1998, his firm, Wasserstein, Perella & Co., celebrated its 10th anniversary with full-page newspaper ads. Some 500 employees strong, the firm has made a name as a savvy M&A adviser that has prospered in the merger boom of the 1990s.

Wasserstein may have written Big Deal: The Battle for Control of America's Leading Corporations to help complete his public redemption. The 50-year-old New Yorker says he wrote the book because "it was in me." The book may have been in him, but his inner editor was on vacation. The 820-page tome, whose underlying thesis is that mergers are good for the economy, is difficult going. There's welcome relief in the form of pithy chapter-opening quotes and miniprofiles on such subjects as Viacom Inc.'s Sumner M. Redstone and buyout king Henry R. Kravis. And the last third is a thorough primer on the nuts and bolts of tender offers and bear hugs, which are attempts to pressure companies into deals. But much of the book is an uninspired rehash of recent deal history, including chapters on specific industries from energy to health care.

Big Deal is certainly not "highly readable and more compelling than Barbarians at the Gate," as its book-jacket copy says. Wasserstein's sister, playwright Wendy, is the writer in the family. Bruce's prose is workmanlike and emotionless, betraying his first career as a lawyer. Nor does he dish any dirt on his famous clients and fellow bankers. Wasserstein ignores the first rule of writing, which is show, don't tell. And for gosh sake, name names! For example, in describing negotiations, he says, "there is the occasional pathological bully. Some people just can't help themselves and rant and rave with red-faced demonstrations of temper." Hmmm. Or how about this wonderfully cryptic sentence: "Being the subject of press scrutiny is a rather remarkable experience, even for someone sympathetic to journalists." Indeed, the only emotion to surface in the book is the author's fear of reporters.

Why is Wasserstein so unwilling to share his undoubtedly rich cache of experiences? Because he is a working investment banker who very much wants to eat lunch in this town again. He has a business to run and can't afford to alienate his clients. The talented journalists who wrote Barbarians at the Gate had far less to lose.

One of Wasserstein's main motives appears to be defending his profession and himself. In response to charges that deals were overpriced in the 1980s, he points out that, in hindsight, the critics were wrong. He rebuts the criticisms of mergers, with his best counterargument being that they allow companies, and thus the economy, to compete and prosper. His analysis of the merger boom is thin: Wasserstein chalks it up to factors from regulatory reform to technological change--nothing we haven't heard before.

Yet Big Deal shines in its final third, the section called "Doing the Deal." Here, Wasserstein's keen instincts, knowledge of legal and accounting issues, and gamesmanship abilities are apparent. Ironically, one of Bid-'em-up Bruce's best chapters is "The Price," which discusses in detail how to value a company.

Another good chapter gives advice on negotiating tactics. "One ideal way in which to control pace is to be the host for the meeting," we are told. Wasserstein also advises that "all anger need not be repressed....A show of anger may well be justified by the situation, particularly if you feel the other side has begun to try to take advantage of your flexibility." Or how about this: "Sometimes there is great advantage to confusion." Big Deal also details the mechanics of dealmaking, from defense tactics to raising cash. "The most common mistake sellers make in negotiated transactions is granting a prospective buyer the exclusive right to negotiate a purchase for a period of time." For certain readers, this advice could be well worth the book's $30 price.

Wasserstein performs a service by stripping away some of the mystique surrounding what highly paid investment bankers actually do, such as run auctions. However, he is largely uncritical of his profession. The only time he acknowledges potential conflicts of interest is in a discussion of "fairness opinions"--when a board of directors hires an investment bank to give its opinion on whether shareholders are getting a fair price. Wasserstein points out that investment banks receive a success fee if the deal they are advising on goes through and get a much lower fee if the deal collapses. It would be nice if he had pointed out other such conflicts.

Wasserstein has written a solid textbook that will be a very useful reference for directors, managers, aspiring investment bankers, and journalists. It is hardly a page-turner. But it may impress a few clients and even get people to replace his hated nickname, Bid-'em-up Bruce, with another: Big Deal Bruce.

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