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Always profitable Three-quarters of a century is a long time to go without an unprofitable year, but Wall Street luminary Bear Stearns has accomplished just that. Since its founding in 1923, the firm has never operated at a loss. Known as "the Bear" to Wall Street players, the venerable institution is one of the nation's top investment banking, securities trading, and brokerage firms. With about half a million dollars in capital among the three of them, Joseph Bear, Robert Stearns, and Harold Mayer started Bear Stearns at the beginning of the Roaring Twenties. The firm initially operated with a small staff out of a single office at 100 Broadway. Founded as a partnership, Bear Stearns initially focused on brokerage. Top of its game Despite consistent returns – the firm has topped 18 percent in return on equity (a common yardstick for a well-performing investment bank) for four straight years – Bear Stearns has not broken into the upper echelon of Wall Street I-banks. Apart from some businesses, such as public finance (underwriting and issuing municipal bonds), in which the firm ranks in the middle of the top five consistently, and mortgage-backed securities, in which the firm consistently ranks in the top three, Bear Stearns usually hovers around in the bottom of the top 10 in the league tables. But the Bear is still a major Wall Street player. In recent years, it has been tapped for some of the world's biggest deals, especially in M&A. The firm advised Starwood Lodging in its high-profile $13.7 billion acquisition of ITT (in 1997), Walt Disney in its $18.8 billion acquisition of Capital Cities/ABC (in 1996), and NYNEX in its $52 billion "merger of equals" with Bell Atlantic (also in 1996). More recently, during fiscal 1999 (June 30 year-end), Bear's M&A group advised on 81 transactions valued at over $150 billion. The firm was chosen to represent American Home Products in its planned $35 billion merger with Monsanto (the merger was called off in the fall of 1998) and McKesson in its $14.5 billion acquisition of HBO & Co. Bear also advised Honeywell in its merger with Allied Signal during 1999. The Honeywell deal was awarded "Best Strategic Deal of the Year" by Mergers & Acquisitions: The Dealmaker's Journal. Finally, in late 1999, Bear was retained by Warner Lambert in its merger discussions with Pfizer. As for equity offerings, the firm lead-managed a $477 million IPO for Young & Rubicam in 1998, as well as a $381 million IPO for Avis Rent-a-Car. In 1999, the firm took what is now About.com public with an $86.25 million offering, and handled the $168 million Prodigy Communications Corporation IPO. That year, Bear also lead-managed IPOs for Wit Capital, MotherNature.com, and the World Wrestling Federation. Additionally, the firm lead-managed the largest municipal bond issue ever ? a $3.5 million issue for the Long Island Power Authority. In the corporate bond world, Bear Stearns has proven a heavy hitter in recent quarters, taking the lead role in a $2.8 billion offering for Ford Motor Credit Company, and in a $1.36 billion offering for Lucent Technologies. Clearing the way Bear Stearns receives more than a third of its profits, and 30 percent of its revenue, from its clearing business. In this business, the firm is hired to execute trades, maintain client records, send out trade confirmations and monthly statements, and settle transactions. (Clearing firms basically do a lot of the paperwork that goes along with brokering, typically for smaller firms.) Close to 2,700 clients employ the Bear for clearing, and even rival firms such as Lehman Brothers have employed the department's services. While Wall Street firms use the Bear for clearing, it is primarily smaller brokerages that use the firm's services, as the appearance of Bear Stearns's prestigious name on paperwork investors receive is often a confidence-selling point. And Bear's clearing services are picking up steam, as are its I-banking businesses. As one analyst told Crains in the summer of 1998: "Clearing is undoubtedly [Bear's] fastest-growing business, but their investment banking has come from nowhere to somewhere." Unfortunately, Bear Stearns' clearing operations have also generated some unwanted attention. One of the many brokerages that the firm has cleared transactions for, A. R. Baron, collapsed after bilking as many as 8,000 investors out of more than $75 million. The government has investigated a possible Bear Stearns role in the Baron case ? in particular, the ties between former Baron CEO Andrew Bressman and Richard Harriton, Bear Stearns' chief of clearing. Though the firm has denied any knowledge of Baron's fraudulent activities, it created a new No. 2 position for its clearing operation in January 1999. In a move that many felt was designed to help improve the its image, the firm hired a top SEC market regulator to fill the spot. In June 1999, the firm announced that it had agreed to a $25 million payment to settle any potential civil suits, although criminal investigation continued. Regardless of the eventual outcome of the A.R. Baron episode, the recent attention may end up hurting it and other Wall Street firms in the clearing business. Some securities lawyers are pressing for new regulations that would hold clearing firms responsible for the actions of their broker clients; in early June 1999, shortly before the civil settlement was reported, the SEC announced slightly stricter regulations concerning clearing firms. Bear chairman Ace Greenberg has warned that stringent regulations could lead some clearing houses to "abandon their business outright."
For investment banking, the firm has about 10 business schools that it targets heavily. At these schools, either David Solomon, who is a co-head of investment banking, or another high-ranking official makes a presentation. At about five other business schools, the firm interviews, but does not give presentations. These schools are essentially the same every year. Bear Stearns draws many of its associates through its summer programs. The firm hires about 25 summer I-banking associates (all in New York), and about 40 full-time associates worldwide (NY summer associates can move full-time into one of the firm's regional offices). The summer hiring process is condensed into an about three-week process. The first round is usually on campus, and usually consists of a two-on-one interview. While students at some schools will travel to Bear's New York headquarters for second rounds, the second round for summers is in many cases simply held that evening on-campus. For example, the University of Chicago business school does not provide for time off from classes to travel for interviews. "Depending on what our competitors' schedules are, sometimes it makes sense to just go ahead and give the offer that night," says one recruiter. According to the firm, anywhere from 55 to 75 percent of I-banking summer associates return for full-time positions. The firm also targets about 25 undergraduate schools each year, which, unlike its target B-schools, can change substantially from year to year, as the firm continually evaluates its success with on-campus undergraduate recruiting. The firm hires about 100 analysts into I-banking worldwide, about 75 of them in New York. For summer analyst positions, although the Bear accepts resumes from all undergraduate schools, and likes to have representation from its core schools, it only recruits on-campus at Wharton. The firm doesn't recruit undergrads for sales and trading, although those with BAs who go through the firm's operations training program can go into sales and trading. For associates in sales, trading, research, and public finance, the firm recruits on-campus at 10 schools – NYU, Columbia, Harvard, Wharton, Chicago, Kellogg, Stanford, UCLA, Fuqua, and Darden. Says a recruiter, "We do very well with Columbia, NYU and Chicago those are our three best." Associates are hired into one of four departments: fixed income, equity, research, or public finance. Candidates in this area can expect one on one interviews, with probably two rounds. "For a full-time hire, you have to have six interviews," says one insider. Summer hires generally go through an on-campus round and then one callback. Generally about 50 to 75 percent of the sales, trading, and public finance associate class are hired through the summer program. In these departments, the firm hires about 20 to 25 summer associates, and about 20 full-time associates. All fixed income hires do 12 weeks of rotations, covering 6 desks in 12 weeks, and are placed after that; equity hires students for both specific slots and as generalists. All research positions are hired on an as-needed basis.
You're not going to a factory One thing that Bear employees love to point out is that the firm offers "so much responsibility that it automatically becomes a rewarding experience." Says one I-banking associate, "You're going to a firm that's large and has its fair share of marquee deals, but you're not going to a factory." Says an associate in sales and trading: "The culture's pretty straightforward as far as giving you important work from day one." That contact notes that his B-school friends at other firms were "given projects that the senior managing director already knew the answer to." Many employees say that they enjoy their "autonomy," which leaves them "free from obnoxious bureaucracy." Reports a sales and trading associate: "The SMD (senior managing director) in my group trades. He's not like just sitting in an office. It's just like the way (Chairman) Ace (Alan Greenberg) sits on the floor." But surely the firm's chairman doesn't roll up his sleeves to do any serious work? Not so, say insiders. "Alan?" says one. "He trades." Make your mark Because "there's very little structure, you have to find your own way" at Bear Stearns. The "flat organization," of the firm, meanwhile, enables everyone "to make an impact at any level." Says one insider: "Every place says they're entrepreneurial – this place is entrepreneurial." The firm also allows for "individual stars to shine." Because of Bear Stearns' "thorough commitment to recognizing individual merit, those who perform well can really hold their heads up high." Explains one sales associate: "It's not just that they throw you a big ball and tell you to run with it. They maybe give you a little ball, and you can dribble around with it and if you do well then you get a bigger ball." Sink or swim? "You may not get the depth of training that you might get at a J.P. Morgan," says one Bear employee, "but you do have the chance to become a star player for the firm." Some employees say the firm has a "survival of the fittest" mentality which "extends into all ranks." Indeed, the Bear has this reputation outside the firm, which insiders say is overblown. "You hear things, but I quickly found out that it wasn't the case," reports one I-banking associate. "This is not a place where you play duck duck goose, but I think there's as much personal contact as at other firms." Bear employees are quick to point out that the firm is not a sink-or-swim environment, saying that they are provided support from senior employees. I-banking associates are assigned a junior and a senior mentor (a VP as the junior mentor, and an MD as a senior mentor). Says an associate in sales and trading: "The guy who sits behind me is my mentor. The guy who sits in front of me is my mentor. I learn something from them every day." Says one associate: "Bear Stearns is a healthy competitive environment. The bottom line is to make money. If all that they say about backstabbing and sink-or-swim were true, how the hell would we make any money?" No paper clips for you The Bear Stearns support staff has been described by employees as "the best available." Unlike other Wall Street firms, there are plenty of secretaries to go around, though some offices may have a limited number depending upon their needs. Word processing and data entry services are also available. And, of course, interns are plentiful and available for all research needs. However, several employees confirm that "the firm does emphasize thrift." The firm distributes a bag of paper clips and rubber bands to each new employee, with a memo from Ace Greenberg that reminds them that "the best poker players leave nothing on the table" (i.e. even in booming markets, watching expenses pays off). Says one insider about the dearth of supplies, "No joke, if I see a paper clip on the floor, or a pen on somebody's desk, if somebody's stupid enough to leave a pen on their desk, I take it."
Stephen A. Lacoff Human Resources
Asset management;Clearing and Custody;Fiduciary;Securities;Lending;Trust;Mergers and Acquisitions Services;Securities trading;Investment;Banking;Brokerage
Credit Suisse First Boston;Donaldson, Lufkin & Jenrette;Goldman Sachs;J.P. Morgan;Lehman Brothers;Merrill Lynch;Morgan Stanley Dean Witter;Salomon Smith Barney;Warburg Dillon Read More Company Profiles For more career information, go to Vault.com ©2000, Vault.com Inc
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