Secretive stockbroking firm Cazenove almost ended up in the hands of Lehman Brothers before it agreed a joint venture with JP Morgan in 2005 and a full takeover by its partner five years later.
Suitors for Cazenove before that deal included Barclays, Merrill Lynch and CSFB, but they all failed to value it highly enough.
Little is known about those courtships as Cazenove was almost as well known for being publicity-shy as for its renowned relationships in UK boardrooms with CEOs, chairmen and investors. But now the man at the heart of the firm during those turbulent times has opened up.
Robert Pickering, Cazenove’s first chief executive, lays bare the ups and downs of life inside its Moorgate offices as it sought a partner and then teamed up with JP Morgan, in a book due to be released on February 23.
He says the joint venture has been a success for both sides, but it was a rough ride at times and the marriage was rocked by cultural differences and infighting among executives.
“The whole thing was a fascinating exercise. I didn't feel like I had to get stuff out there like therapy or anything like that, I just thought it was an interesting story and realistically the only other person who could have told it was David Mayhew. So I thought I better tell it,” Pickering told IFR.
In "Blue Blood: Cazenove in the age of global banking", Pickering recounts the firm’s struggles after the Big Bang in 1986; its decision in 2000 to abandon its partnership structure; and how it went fishing for potential buyers. There are cameo appearances from Jamie Dimon, Dick Fuld, Stephen Schwarzman and Bob Diamond.
Pickering spent 23 years at Cazenove after joining in 1985 after two years in law. He headed corporate finance from 1998 and in 2001 became Cazenove CEO, aged 41, and was then CEO of JP Morgan Cazenove when it was formed in February 2005. He left in early 2008.
The book says Dimon was supportive and always “friendly and relaxed” but Pickering had frequent run-ins with Bill Winters, head of JP Morgan’s investment bank at the time and now CEO of Standard Chartered.
“It was exciting, but it was scary. I was quite young and I wasn't that experienced in management terms, and it was all very high profile,” he recalled of that era.
Pickering, now 63, said he had always thought about writing a book about what happened and is glad he left some distance before putting pen to paper, as the last few years at Cazenove were “quite bruising”.
After leaving Cazenove, he advised individuals and investment firms and was a director at CLSA and Itau BBA, and is currently a director at Marex, the commodities and financial trading firm.
“I wouldn't have minded another job like running Cazenove, but there aren’t any other jobs like that, it was a very unusual organisation,” he said.
“Air of mystique”
Cazenove, founded in 1823, was indeed an exclusive firm. It was rumoured to be The Queen’s stockbroker. “This heady mix of exclusivity, discretion and money combined to give the firm a unique air of mystique,” Pickering says in the book.
But after the Big Bang, US banks started encroaching. Cazenove lacked capital and was failing to monetise relationships and struggling to attract younger bankers.
By 2000, the partners – including City legend David Mayhew – knew change was needed to survive. Pickering recalled Mayhew as elegant and charming, but with nerves of steel – he was often referred to in the firm as "Tommy", after Tommy Steele, a famous English entertainer.
Cazenove had a brief flirtation with Merrill Lynch, then announced in November 2000 it would abandon its partnership structure, raise external capital and list on the stock market.
But by 2003, Mayhew and new CEO Pickering were fishing again and getting bites, including from Nomura, Citigroup, Morgan Stanley, CSFB and Barclays. But none valued it at the £1bn the firm and advisers thought it was worth.
Lehman showed serious interest, and there were attractions with the up-and-coming Wall Street challenger, but concerns about price and culture were never resolved.
“It goes without saying that selling our firm to Lehman’s would have been a disastrous mistake and I would have been burned in effigy ever after at the annual luncheon of The Cazenove Association if it had come to pass,” Pickering said in the book.
Enter JP Morgan in June 2004. The idea for a joint venture came from Ian Hannam, a star dealmaker at the US bank, although Cazenove was initially lukewarm and thought it too complex. But the merits of combining Cazenove’s unrivalled UK client franchise with JP Morgan’s financial power, reach and product strength (and weak UK position) became compelling and the JV was struck. JP Morgan took up its option to fully buy Cazenove out in 2010.
There were culture problems behind closed doors, however, mostly stemming from JP Morgan executives wanting access to Cazenove’s relationships.
But Pickering said there were other issues – while Cazenove hosted modest dinners, Hannam hired the Tower of London; and junior bankers at JP Morgan were paid well but had a “borderline intolerable” work/life balance and were worried they wouldn’t be able to work hard enough in the JV.
But the deal worked for both sides. It valued Cazenove at about £2bn, a good return for former partners and investors. And it helped make JP Morgan a top investment bank in the UK and Europe. Mayhew and several other senior Cazenove bankers are still at the US bank.
“The joint venture worked in a brilliant and evolutionary way,” Pickering said in the book.
But that masks the strains he clearly felt.
“It was very successful, but from my personal point of view, it was a pretty bruising and unenjoyable experience because of the jockeying for control and cultural differences and all the rest of it,” Pickering told IFR.
“Joint ventures are notoriously tricky things and the chief executive of any joint venture is the kind of lightning rod for that.”