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Acquired and de-acquired Founded 150 years ago as a cotton-trading business in the American South, Lehman Brothers offers a wide range of global investment banking services, including fixed income and equities sales; trading and research; M&A advisory; public finance; and private client services. American Express acquired the firm in 1984; later, when American Express decided to refocus on its core business, Lehman Brothers was spun off. With a $1 billion capital enhancement, Lehman was sold to American Express stockholders and the public in 1994. Once again a stand-alone firm, Lehman has been fighting hard to regain its position as one of Wall Street's premier investment banks. After some tough decisions, such as major layoffs and cost cutting in 1994 and 1995, the firm has boosted its revenues, increased its profitability, and gained market share in high-margin businesses such as equity origination, M&A, and high yield. Today, it is among the most profitable firms on Wall Street. Word on the Street in early 1998 had Lehman coupling again, perhaps with Chase Manhattan or Deutsche Bank. The rumors sent Lehman's stock price skyrocketing. In July 1998, the stock reached a high of $85. But as the overall market began to fall midyear, Lehman's stock took a tumble. The company's stock sank to the mid-$20 range before recovering to once again healthy levels in late 1998. In the 52 weeks from February 1999 to February 2000 the stock traded as low as $46 1/8 and as high as $85 9/16. We've arrived After years of low returns, Lehman has recently been making a case that it again should be considered one of Wall Street's top investment banks. In 1996 and 1997, the trimmer Lehman began rebuilding itself; in 1997, 1998, and 1999 profits reached record levels. And recently, Lehman Brothers has built its human base back up to about 8,900 workers. However, Lehman is still among the leaner firms on Wall Street, and has fewer employees now than it had in 1994. Despite the turmoil in debt markets in August and September, Lehman didn't have large-scale layoffs - even as competitors such as Merrill Lynch were announcing broad staff cuts - and ended 1998 with record profits of $736 million. In 1999, the company reported profits of $1.13 billion, an impressive 54 percent increase over 1998. Today, after posting a return on equity for 1999 of 21.8 percent, the firm is among the more profitable firms on Wall Street. In particular, Lehman, known traditionally for its strength in fixed income, has performed increasingly well in equities and investment banking since targeting those businesses in 1996. Also, the firm's strategy of expanding globally, especially in London, has paid off. And in 1999, Lehman agreed to a broad deal with mutual fund giant Fidelity Investments that will provide a strong retail outlet for its research and underwritings (and consequently help the firm win additional underwriting roles). Big deals The bank has concentrated on high-margin businesses, including equity underwriting, mergers and acquisitions, and high yield. In fact, in the first quarter of 1998, Lehman placed a surprising first in the M&A tables, beating out Goldman, Merrill, and Morgan Stanley. (The firm ended up No. 6 for the full year, up two notches from 1997.) But 1999 was a disappointing year in M&A for Lehman. The firm fell to No. 8 on the list of worldwide completed M&A deals. The firm advised on 182 deals worth a total of $178.8 billion that year, as compared to 221 deals worth a combined $275.4 billion in 1998. Over the past few years, the firm has been active in some of the Street's largest transactions. In 1999, Lehman lead-managed Qualcomm's $1.1 billion IPO. It was Olivetti's advisor in its $34 billion acquisition of Telecom Italia, is advising MediaOne in its $63 billion pending merger with AT&T, and is assisting U.S. West in its $43 billion pending deal with Qwest. In 1999, Lehman also advised Honeywell in its acquisition of Pittway Corporation, which was selected as a deal of the year by Investment Dealers Digest. Giving retail a boost As retail brokerage firms faced increasing pressure from online brokerages that could lure away cost-conscious clients, Lehman Brothers Holdings Inc. announced in July 2000 that it had acquired the private client services unit of SG Cowen, a smaller rival firm. Lehman gained 130 SG Cowen brokers, 60,000 clients and assets worth approximately $10 billion.
First impressions are key at Lehman. After meeting students at colleges and business schools, the firm's recruiters will focus on a number of top candidates. Says one recent MBA hire: "I was targeted and was pursued hard." In fact, the firm prefers to have identified its targets by the time campus interviewing starts. The firm focuses on 10 business schools (Chicago, Columbia, Wharton, Tuck, Fuqua, Stern, UCLA, Kellogg, Havard, and MIT?s Sloan). How does Lehman pick its targets? In part, through on-campus get-to-know you functions. For example, the firm's sales and trading recruiters host a "Trading Game" on campus, where they simulate three to four "pits" similar to those on the Chicago Futures exchanges. The "game" (read: tryout) lasts four to five hours. People from Lehman play one role, while students play another. The trading game allows Lehman to observe students in action, so it can identify strong candidates. Lehman also hosts cocktail parties to identify targets. Despite these ulterior motives, the firm tries to keep the events as informal and social as possible, insiders say. "The focus is on personalities." Like the summer programs at most bulge bracket firms, Lehman's summer associate programs act as a feeder system for full-time hires. The firm reports that 75 percent of its incoming full-time class for the fall of 1998 were interns at Lehman. The firm also reports that 75 percent of the MBAs Lehman hires into capital markets for the summer get offers. Summer associates receive their offers within two weeks of the end of the program. MBAs are hired into the firm as associates. Those interested in Lehman should visit the firm's web site, located at www.lehman.com and chock full of detailed recruiting information. Most associates report an excellent recruitment process. Says one: "There was no bullshit in the recruiting process. They were honest with us."
Effort rewarded Perhaps the most attractive aspect of working for Lehman, employees observe, is that "the firm rewards effort. This place is as close to a meritocracy as it gets." "I've been given more responsibility than I'd ever imagined," says one associate in trading. Says another associate, in Lehman's fixed income group: "It's an aggressive firm that will let you take risk, if you can justify it." "For a young person, the opportunity to develop a career at a place like Lehman is so much greater (than elsewhere)." Says another capital markets associate: "[Lehman gives] lots of responsibility early. They push employees to progress quickly." Says another associate in that area: "The opportunity is fantastic. The firm has focused on a number of growth opportunities and is aggressive about getting people involved." A 1998 summer associate relates that a summer research analyst helped put together some industry research because she had some expertise, and "they put her name on the cover. That's not something that's going to happen if you're at Merrill Lynch." Continues that contact: "You're given responsibility as a trader. If you're interested in equities, you have the opportunity to do it. In other places, you have to wait till somebody dies, or something like that. It's a very young culture here." Scrappy, friendly survivors Lehman's culture is one of "survivors and fighters - people have been through a lot together, and they are very loyal to each other," says one recent hire. Employees speak enthusiastically about Lehman's "social" corporate offices, where "most employees are extremely nice and friendly, and very down-to-earth, unlike at some other places on the Street." As one new hire says, Lehman's "culture is open," largely because of the "affable" upper management who "make an effort to be readily approachable." "Culture very much depends on which business and which desk, but overall, it is not at all stuffy," says one associate in trading. "There are fairly honest professional people." Snootiness at a minimum "Lehman has more of a laid-back collegial environment than other firms that I've worked at. I've seen all the other firms, and also over the summer I visited a bunch of firms," says one associate who summered at Lehman. "It's not laid back in that people are easygoing, it just doesn't have the pretension that you might have at other places," continues that associate. "People work hard, but people also are welcoming, no one's putting on airs, that's the feeling that I got. I've been all around the firm, and I never had a situation where someone blew me off or wasn't interested in talking about him." Says one analyst in the firm?s research department: "It's warm, and less intense than your typical Wall Street firm." Cozy indeed. Delta Tau Lehman Although Lehman may be laid-back in the sense of not being stuffy or aristocratic, that doesn't mean the temperature doesn't rise at the firm. One ex-employee in New York notes, "There's a lot more yelling at Lehman Brothers than at my current firm." Insiders say that Lehman, like most major investment banks, has a "macho culture" and "many arrogant attitudes." Says one: "Antics are somewhat unprofessional. Many employees have something of a locker-room, fraternity culture." Says one insider: "It's meritocratic but can be easily abused by overly aggressive people." Getting more laid back As with most of its Wall Street comrades, Lehman brothers has had to loosen the stiff tie and suit dress code. As more and more professionals opt for the Internet over investment banking, Lehman is just one firm making some serious changes. The firm now has a full time business casual dress policy (except for certain client meetings).
MaryAnne Rasmussen Recruiting Department
Investment banking;Fixed Income Sales, Trading and Research;Equity Sales, Trading and Research;Asset Management, Merchant Banking and Venture Capital;Private Client Services
Bear Stearns;Credit Suisse First Boston;Donaldson, Lufkin & Jenrette;Goldman Sachs;J.P. Morgan;Merrill Lynch;Morgan Stanley Dean Witter;Salomon Smith Barney More Company Profiles For more career information, go to Vault.com ©2000, Vault.com Inc
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