Felix Rohatyn

If you want to understand what an investment banker actually does at the highest level, you do not start with a bulge-bracket firm with twelve thousand employees and a trading floor the size of a football field. You start with one man on the 32nd floor of Rockefeller Center, with a small team, no capital at risk, and a phone that rings whenever a Fortune 500 CEO is about to do something he cannot publicly admit yet. That man, for forty years, was Felix Rohatyn.

Rohatyn was the dominant M&A adviser of the post-war American economy and the architect of the modern pure-advisory boutique. He never managed a balance sheet, never ran a trading desk, never built a sales force. He sold judgment, discretion, and access. Goldman Sachs and Morgan Stanley, the firms that now dominate league tables, copied his model for their advisory franchises. Centerview, Evercore, Moelis, PJT, Lazard itself in its modern form, all trace their DNA back to the Lazard of Andre Meyer and Felix Rohatyn.

From Vienna refugee to Lazard partner

Felix Rohatyn was born in Vienna in 1928 to a Jewish family that ran a small brewery. In March 1938 the Nazis annexed Austria. The family fled, first to France, then ahead of the German invasion in 1940 to Spain, Portugal, Casablanca and finally by ship to Rio de Janeiro. They arrived in New York City as refugees in 1942. He was 14, spoke broken English, and had seen first-hand what happens when institutions collapse.

He worked his way through Middlebury College and graduated in 1948 with a degree in physics. He had no contacts on Wall Street. He took a summer job as a clerk at Lazard Freres, then a tiny European partnership headquartered in a Rockefeller Center suite, and never left. The firm was run by Andre Meyer, another refugee, who had escaped Vichy France in 1940 and rebuilt the New York office with a handful of partners. Meyer became Rohatyn’s mentor and the single most formative figure of his career.

Meyer’s lesson was simple. The bank had two assets, brains and reputation. Capital was a distraction. The job was to advise CEOs on the most important transactions of their careers, and the way to win mandates was to make yourself indispensable to one or two of them. Concentrate, do not diversify.

The ITT years

Rohatyn made partner at Lazard in 1961 and almost immediately attached himself to Harold Geneen, the chief executive of ITT. Geneen was building the most acquisitive conglomerate in American corporate history. Between 1961 and 1971 he completed roughly 350 acquisitions, of every imaginable kind: car-rental businesses, baking companies, hotel chains, electronics firms, parking-lot operators.

Rohatyn was the principal banker on most of them. He served on the ITT board. He drafted the strategy memos. He negotiated the prices. The defining transaction was the 1968 acquisition of Hartford Insurance, then the second-largest property and casualty insurer in the country, for $1.5 billion in ITT stock. It was the largest M&A deal of its kind to that point. It also became a federal antitrust case under the Nixon administration that nearly broke Geneen and put Rohatyn on the front page of every paper in America.

ITT taught him the playbook for advising serial acquirers, which is the same playbook Goldman, Lazard and Centerview use today on Berkshire, Constellation Software and any large strategic buyer: be on the inside, know the next ten targets, be the first call when a board needs cover.

• Principle 1

  Concentrate on one or two CEOs

  Rohatyn's ITT mandate produced more revenue than most banks' entire client lists. Depth beats breadth in advisory.

• Principle 2

  Stay on the board

  Information advantage compounds. The director sees the strategy memo before the banker.

• Principle 3

  No capital at risk

  Lazard never underwrote. The advice was the product, and the absence of conflicts was the moat.

• Principle 4

  Discretion is mandatory

  Rohatyn never leaked. CEOs hire boutiques precisely because the news will not appear in tomorrow's Journal.

Saving New York

In the spring of 1975 New York City was technically insolvent. Years of off-balance-sheet borrowing had produced roughly $14 billion in debt. The major banks refused to roll over the notes. Mayor Abraham Beame and Governor Hugh Carey turned to Rohatyn. The state created the Municipal Assistance Corporation, a special-purpose vehicle that would issue new bonds backed by city sales-tax revenue and use the proceeds to refinance the old debt at lower coupons. Rohatyn served as chairman of MAC, without compensation, for the next eighteen years.

MAC issued roughly $10 billion of bonds in stages. The combination of those issuances, federal loan guarantees, and an austerity programme negotiated with the city’s unions, kept New York out of bankruptcy court. The rescue became the textbook case in municipal restructuring and is still studied at every business school.

For Rohatyn personally, it was the moment his name became national currency. He had been a successful banker before MAC. After MAC he was the most trusted M&A counsel in the country. Every CEO who picked up the phone knew exactly who he was, and what he had done for the city.

The Lazard franchise

Through the 1980s and 1990s Lazard, with Rohatyn as senior dealmaker, advised on a long line of landmark transactions: GE’s acquisition of RCA in 1986, Time’s defence in the 1989 Paramount fight, Kraft, Nabisco, Lehman, Disney, ABC. He was personally on most of the calls that mattered.

The firm operated with three working partnerships, one in New York, one in London, one in Paris, and fewer than 100 partners worldwide. The contrast with Goldman or Morgan Stanley, each of which had thousands of bankers by then, was the whole point. The product was scarcity. Each client felt they were getting the senior person, because they actually were.

He retired from Lazard in 1997 to become US Ambassador to France under President Clinton, served three years in Paris, and returned to the firm as a senior adviser in 2008 during the financial crisis. He died in 2019 at age 91. The boutique advisory model he pioneered is now the fastest-growing segment of investment banking globally. Centerview, Evercore, PJT, Moelis and the rebuilt Lazard collectively earn billions in fees a year doing exactly what Felix Rohatyn started doing in 1948 with one phone line and one mentor in Rockefeller Center.

What to learn from Rohatyn

If you are a banking analyst or associate today, the Rohatyn career is the clearest road map in the industry. The skills he built, in order, were: technical competence on transactions, mastery of one strategic acquirer, public reputation through a high-visibility civic project, and finally franchise authority that brought CEOs to him without prospecting. None of it required a balance sheet, a trading floor, or scale. All of it required judgment, discretion, and the willingness to tell powerful people things they did not want to hear.