Sunday, 22 Apr 2018

Rothschild, the secrets of a renaissance

“Jew under Petain, pariah under Mitterrand, for me that’s enough. ” It is an article full of anger and bitterness that Guy de Rothschild addresses to the newspaper “Le Monde”, this October 30, 1981. The law that nationalizes the prestigious French bank has just been voted. A real cataclysm for the family, who did not know how to hear the warnings and warnings – especially those emanating from Jacques Attali, François Mitterrand’s advisor. The compensation of 500 million francs hardly comfort the shareholders. The shock is harsh for the patriarch, while the faithful are forced to leave the offices of the rue Laffite. In Paris, nobody imagines them bouncing. “You have to do something again” says Guy to his son David, before leaving for the United States. From the shock of nationalization to rebirth Do something again? David has been thinking about it for a while now. The young man in his forties briefly considered getting into politics – he was then mayor of Pont-l’Evêque. But with the help of his cousin Eric, he decides to raise the glove. Continue the family saga started 165 years ago by launching a new financial institution. It was impossible to compete head-on with the former family bank. The authorities have been clear on this. And looking to poach customers would be doomed. David and Eric will get around the obstacle. They decide not to create a new investment bank but a securities firm specialized in portfolio management. To do this, they rely on a small structure of participations that escaped nationalization, the company Paris Orléans, a former railway company acquired by James de Rothschild in the 1850s, became holding company . David takes the presidency of Paris Orléans, which starts its activities with a handful of collaborators. The beginnings are not easy. The two cousins ​​together amount to a mere 30 million francs of capital. That’s a lot for a personal fortune, but nothing for a bank that needs a lot financial area . Yesterday’s friends are turning away for fear of displeasing the new power. The family and the faithful are therefore asked to inject funds. The English branch led by Sir Evelyn de Rothschild, “the Emperor of the City,” is in the game. Edmond de Rothschild agrees to participate a little. Just like the flamboyant British financier Jimmy Goldsmith or the small Martin Maurel bank, who had already helped the Rothschild family during the Second World War. David can also count on the support of some big business names. Including that of Ambroise Roux, the powerful boss of the French Association of Private Enterprises (Afep), which he has just created. He joins the circles of the industrial and financial establishment. And gets a valuable victory in 1984, when Robert Badinter convinces Mitterrand to allow the family to become a real bank. The time of rebirth has come. The legislative elections and the first cohabitation will allow it to accelerate. Right back to power, the bank finally gets permission to do business under its own name. The choice of a model If the desire to reconnect with the prestigious family history is there, remains to find the means to achieve it. In the mid-1980s, Paris Orléans Bank is still a modest boutique specializing in mergers and acquisitions, advice and editing of financial transactions and wealth management services. But David de Rothschild no longer hides his ambition: he wants to build a new Lazard, the reference of investment banks. He will get on with the help of his younger Edward back from Wall Street where he witnessed the emergence of the financial capitalism . On both sides of the Atlantic, the two brothers were able to appreciate the power of a model that places home bankers at the heart of the great business maneuvers, making them the privileged interlocutors of the big bosses in everyday life and in the execution. their strategic projects in the long term. The way is traced, they will follow it … but in their own way. It’s out of the question to adopt the Lazard model as it is. Three major improvements will be made. First, the culture of internal rivalry between the big names of the house, cleverly maintained boulevard Haussmann by Michel David-Weill, is proscribed. Then, if the big associates will be very generously paid, they will not be associated with the capital as it is the practice with the rival. Finally, the bank’s rule is not to contribute to hostile operations and not to advise foreign predators. The idea is to preserve the family character of the company while ensuring the respect of the values ​​considered cardinal by David, collegiality, discretion and a certain patriotism. What ensure the originality and durability of the model. Takeoff will be done gradually. Faced with a Lazard at the peak of its power, Rothschild & Co is still involved in the privatization of Paribas and Matra during the first cohabitation. In 1989, the house made its first big move on the transfer market by recruiting its first managing partner of Lazard, Jean-Claude Meyer. This take, with obvious symbolic significance, also makes it possible to gain a foothold in international M & A operations. In 1990, Rothschild accompanies Jacobs Suchard in his merger with Kraft. The mechanism is engaged, nothing will stop it. Reunification The revival of the French house greatly impressed the City. And obviously did not escape Evelyn de Rothschild, who is looking for a successor since the 1990s. Sir Evelyn appreciates the charisma, the sense of diplomacy and the negotiating skills of his cousin. The patriarch also knows that David will not be tempted to “tip the table” if the two houses come together. Then in 2003, when he decides to take a step back, the Emperor of the City launches the big maneuvers. He publicly announces that he has chosen David to succeed him at the helm of NM Rothschild & Sons. And announces with his cousin a vast reorganization of their activities. It is not yet a question of fusion, but rather of unification. The editing is complex: a ridge structure with the evocative name of “Concordia” is created for this purpose. Owned equally by the two branches, it covers all activities carried out by the two families, united under the same banner “Rothschild Group”. It is a turning point in the history of the dynasty. The different European houses have always used to work together. But never had they been united under one roof and directed by the same person. David had long since grasped the interest of such a union. The head of the French house managed to revive a bank, which continues to grow and has obtained some international mandates. But he is also aware of its shortcomings: the Paris branch is still too small, it lacks teams and still has some way to go to become a major international investment bank. English cousins ​​can help him. Once formed, the “Rothschild Group” can multiply its striking power. It acquires a significant size in all skills of finance: investment banking, financial engineering, private equity financing, private banking … Even if, as a first step, each bank keeps its natural lands: the English-speaking markets and Asian for London, France and French markets for Paris. Europe becomes a land of sharing. Time will do the rest. Unification will leave room for more ambitious integration in a small decade. With great skill, David is busy giving up some historical activities that have become less strategic, such as the fixing gold and the credit bank. And continues over the 2000s the reorganization of the empire. In 2008, the French branch bought part of Sir Evelyn’s shares. The two banking hubs of Paris and London are consolidated in 2012. The financial galaxy is simplified by the erasure of several holding companies. In 2015, Paris Orléans takes the name of Rothschild & Co. A form of consecration for David, more than thirty years after relaunching the bank, with 10 people and a capital of 30 million francs in his pocket … A name change which will not be without irritating the Geneva branch of the family, more specialized in the management of fortune, and directed today by Ariane de Rothschild, the wife of Benjamin. David’s personal equation
“I have spent my life looking for better people than me” , says David de Rothschild this day of August 2015, in his Normandy property. He says it with that little smile that never leaves him and in this tone mixing humor and sincere modesty. Adding all the same that the company on which he rebuilt his group after the nationalization, Paris Orléans, was worth only 10 million current euros, against more than 2 billion today. “It’s modest on the scale of the big business of the world, but it allows us to exist and to have some ambitions …” All David de Rothschild is here. In this art of understatement that contrasts in a world where one pushes one’s neck for much less than that. In this quick mischievous blue glance, to check the effect produced on his interlocutor. And in this “We” referring as much to the house he rebuilt with managing partners sharing his values ​​as to the now reunited family. The estate is not for now, but everything is perfectly clear in his head. “It seems to me that my son has the qualities to take control in turn,” he slips. For the Rothschilds, the time scale is measured in generations. The founder of the dynasty, Mayer Amschel Rothschild, was born in 1743 in the Jewish ghetto of Frankfurt. His five sons – the five arrows of the bank’s coat of arms – prospered the small exchange business he had created, especially Nathan in London and James in Paris. Two hundred years later, the reunification of the two branches, in 2003, perfectly illustrates the qualities that will make the fortune of David and were decisive in the rebirth of the bank. Much less powerful, then, than his London cousin Evelyn, David is a diplomat in the best sense of the word, able to find the right balance point within the family. The graduate of Sciences Po in the worldly image is a formidable man of consensus. At the end of the 1990s, at the head of the merchant banking operations of the two branches, then still distinct, he excels in what is most difficult, the art of working together bankers willingly jealous of their clients. “I spend a lot of time easing tensions rather than throwing oil on the fire” he confides to the Financial Times. Affable, urban, phlegmatic, he knows how to create the collegiality that is lacking in rival houses. He knows how to make the best of the world want to join Rothschild. ” Her added value lies in this ability to attract talent and develop long-term, trusting relationships with customers, “says a former partner. Thus over the years, it is obvious at the head of this European dynasty before being English or French, as it begins the third century of its history … A bank close to power From Georges Pompidou, who worked nearly ten years in the service of the Rothschild brothers in the 1950s, to Emmanuel Macron, youngest managing partner of the bank before becoming deputy general secretary of the Elysee in 2012, the house has always cultivated close links with power. Natural links, intimate and above all stronger than political upheavals. After the victory of the right in the legislative elections of 1986, Rothschild welcomed the most brilliant financial inspector of his generation, Jean-Charles Naouri, who was for four years director of cabinet of the Minister of Finance of François Mitterrand, Pierre Bérégovoy. Lazard wanted it, Naouri chose Rothschild. A major take, symbol of the return to grace of the house. The vagaries of politics pass, the strength of the network remains. After the left, the right: David de Rothschild debauchery Jean-Claude Meyer, banker in view of Lazard and close to Jerome Monod, an intimate Jacques Chirac. The scenario is repeated after the defeat of Edouard Balladur in the presidential race in 1995, with the arrival of Nicolas Bazire, the former chief of staff of the Prime Minister. Or with Sébastien Proto, the author of Nicolas Sarkozy’s program in 2012 – a Nicolas Sarkozy who worked elsewhere for the bank as a lawyer. In this antechamber of power, men from right-wing stables cross figures from the left as Lionel Zinsou, a close to Laurent Fabius. The consecration The privatization of Renault in 1993 is a key moment in the bank’s history. By becoming the council of the state in this operation with obvious symbolic significance, Rothschild appears in broad daylight as a credible alternative to Lazard. Better, while the establishment of the boulevard Haussmann is mired in internal quarrels that will gradually lose his leadership, the house of David has the wind in the back. The arrival of new trucks in the home team is no stranger. Two recruitments XXL among others testify to it. That of Gérard Worms, first. The former boss of Suez indeed meets most of the bosses of the CAC 40 and, as president of the century, he knows all those who count in the circles of power. This is how Claude Bébéar, Jean-René Fourtou or Serge Tchuruk for example will become loyal customers of the bank. The recruitment of François Henrot, after his passing at the head of France Telecom, will also contribute to make the establishment a key partner of the largest French groups. Its bankers are from all major operations or almost (creation of Aventis, defense of Societe Generale in the great banking battle of 1999, France Telecom …). We are now looking at avenue Matignon for advice from Rothschild’s partners! The house is firmly established at the top of the investment bank in France, it will not come down. Even the departure of Edouard from 2003 will change nothing. Especially as young house shoots begin to take over, like Grégoire Chertok or Cyril de Mont-Marin for example. But David does not stop there. With his right hand Olivier Pécoux, managing director, he seeks to expand the scope of his activities. It is for this purpose that he establishes a partnership with the Dutch company ABN AMRO to participate in market operations ( Initial Public Offering , issues of securities …). From the end of the 1990s, he also focused on consulting companies in an emerging sector, that of private equity . This bet, unexpected at the time, proves to be a winner beyond all hope. Riding on the accelerated development of the LBO , the teams of Laurent Baril, the managing partner in charge of the activity, will do wonders. So much so that this business will represent a third of the profits of the bank in 2007! It was at this time that the company decided to acquire a third business alongside Mergers & Acquisitions and Asset Management, investing in unlisted companies. Entrusted to a historical partner, Marc-Olivier Laurent, he also offers a space in which Alexandre de Rothschild can make his debut. Considered a long time as his natural heir by David, the young man proves his worth without shadowing the big names of the bank. What give him time to make a name while becoming familiar with the entire house, quietly and without upsetting habits. Sources: “The Rothschild saga” by Tristan Gaston-Breton, Tallandier editions “Rothschild, a bank in power” by Martine Orange, Albin Michel editions

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