Allen's house of dreams
Despite paying its bankers and traders base salaries of $20,000 to $30,000 and expecting them to pay for their travel and secretarial expenses, Allen & Co. remains a dream employer for investment bankers trained at the nation's biggest investment houses. Allen & Co.'s single office on Manhattan's Fifth Avenue houses about 200 people, compared to Merrill Lynch's more than 60,000 employees. While larger Wall Street firms often carry billions in debt, Allen & Co. is solidly in the black.
The company specializes in the media and entertainment industry, and works only in venture capital, underwriting, private placements and money management, allowing it to follow a unique management philosophy. Allen principals must make a substantial personal investment in all deals they bring in to the firm, ensuring that "if the client pays, Allen pays." Returns on these investments can equal up to 100 percent of a banker's annual pay. Allen's lack of a research department is also unusual; the company's principals perform their own research.
Charles Allen and his brother Herbert founded Allen & Co. as a partnership in 1922, looking for promising companies to invest in. In 1972, Herbert Jr., the founder's son and successor, proved his mettle by putting up $1 million of his own money and $500,000 of the firm's to buy a controlling interest in Columbia Pictures. In 1982, Allen sold Columbia to Coca-Cola. (Coke later sold Columbia.) Allen & Co. has continued to play a key role in the entertainment industry with clients such as Creative Artists, Walt Disney, and Viacom; Allen himself had a hand in hooking up Sony and Columbia. One media mogul has said, "Deals just don't get done in Hollywood unless Allen & Co. has a hand in it."
New media, too
Allen & Co. is also a wheeler and dealer in the new media business, thanks largely to star banker Nancy Peretsman. Peretsman took online airline ticket broker Priceline.com public in 1998; shortly after the IPO, the Connecticut company's market capitalization broke eight digits. She also is involved with N2K, the online CD retailer that merged with CDNow, and Realtor.com. Peretsman also has been ultra-active in traditional media deals. Clients King World and MediaOne were sold to CBS and AT&T for $2.5 billion and $60 billion, respectively.
The king of megadeals
Allen & Co. is a bit different than other investment banks, as it often functions more like a venture capital fund than an I-bank. The company does not charge a set fee for putting together its gigantic entertainment deals, because, as Herb Allen told Red Herring, the company feels it cannot "set a fee before adding any value to the transaction. Most of what Wall Street does in mergers and acquisitions is legal protection, not value-added." Allen & Co. also deliberately declines to hire security analysts, because Herb Allen dubs them "fairly weak historians and very poor prognosticators. [Analysts] don't buy what they're recommending, so they immediately have a conflict of interest with their customers."
Going to play in Sun Valley
Allen & Co. is perhaps best known for its famous Sun Valley conference, which gathers together some of the finest minds in business every year for a high-powered schmoozefest in a bucolic Idaho setting. In 1998, Allen & Co. featured a panel on management issues, moderated by Allen & Co. chairman Don Keough, with panelists like Rupert Murdoch, Barry Diller and Intel's Andy Grove. A panel on race and business was peopled by panelists like Bob Johnson of Black Entertainment Television and Dick Parsons of Time Warner, and was moderated by mellow-voiced Tom Brokaw. Bill Gates has attended in the past and is allowed to talk about "whatever he wants."
Allen & Co.'s personnel department does not accept outside calls, does not maintain a job hotline, and does not publicize job openings. The firm does, however, accept resumes mailed to 711 Fifth Avenue, New York, NY 10022. Allen hires only MBAs as bankers and typically requires two to three years of experience. Insiders say getting a job directly out of business school is rare, and getting hired right out of college is "next to impossible."
In an exclusive interview with Vault Reports, Chairman of Allen & Co. Don Keough had this to say to prospective Allen employees: "My advice to a young person, especially a business school student, interested in Allen & Company is to be sure you become an interesting person. You should develop a full range of interests and not worry about a career. Instead, take courses that interest you-- statistics, philosophy and so on. Secondly, any young person who doesn't put the international world into perspective is a damn fool. Any education in today's world must incorporate some part of it outside the United States."
"We're interested in people who understand other countries and are fluent in other languages. You have to bring something other than a great MBA background to get in the door [at Allen]. You need experience, which means we rarely take undergrads or someone straight out of business school. You need to come in with some credentials from the business world, and we need to be sure that you want to stay here long term. Because we take so few, we have the luxury of taking our time evaluating new people." Adds another insider, "we do a lot in the entertainment and media field, so an interest in that area is helpful."
A special, secret society
Bankers say working at Allen & Co. makes them feel like members of "a very special, secret society." Befitting such a group, working conditions are "optimal." Employees describe their offices as "classy" with "lots of dark mahogany on walls and desks" and "original Norman Rockwell paintings." The office "just oozes success." Dress at Allen is "sharp but conservative," even though employees often work with "flashy media clients."
The firm is social, since it is "full of people who schmooze for a living." Senior bankers who have perfected their schmoozing take part in Allen & Co.'s "famed annual retreat for media moguls" in Sun Valley Idaho with "spectacular guests like Bill Gates and Mike Eisner in attendance." This sort of networking means that while Allen "isn't a household name," it "carries almost as much mystique as CAA" in the media business. While some insiders mention there are several women in "senior positions," others report that Allen is "still mostly a male firm."
In addition to "above-average" pay, our sources adore the opportunity to "invest in Allen & Co. deals and share in profits." One banker says: "The culture here is one of risk-taking, both on a personal and corporate level. You must have a significant portion of your net worth at risk if you want to work here, and you must be a fee generator soon after arriving." Confides another contact: "There's salary plus a percentage of the fees from deals that you work on. You get paid when a fee comes in--"no waiting for year-end bonus. If you have a bad year, tough luck. On the other hand, there is no theoretical limit on the upside."
Because of this payment structure, the firm is "incredibly entrepreneurial" and suited for "driven and individualistic" employees: "There is no face time or kissing up to get a big bonus." Workload is "very much dependent on what you are working on" but is generally described as "better than your other Wall Street banks" in part because face time is not a priority. "All that counts is your ability to make abnormally high returns for the firm while maintaining an absolutely clean reputation," explains one insider. "The firm's reputation is paramount. Anyone that does anything unethical or illegal will be removed." As one Allen insider summarizes, "While [Allen & Co.] is a great place, it is unlikely that it would be suited for most people."
Venture capital;Underwriting;Money management
Goldman Sachs;Lazard Freres & Co.;Morgan Stanley Dean Witter
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