The Man Who Schooled Wall Street

Wasserstein was one of the first lawyers to leave law for the far more lucrative investment-banking business. At that time, Lazard, Goldman Sachs, and Morgan Stanley dominated the mergers and acquisitions business. At First Boston, Wasserstein and Perella had to offer clients something different, and that difference turned out to be Wasserstein’s technical and strategic brilliance. He pioneered takeover techniques—such as the "street sweep," the now-outlawed step of buying the stock of a target at will in the open market before launching a deal—and the use of “bridge loans” as a way to help corporate raiders buy companies they otherwise couldn’t afford. He helped corporate raiders such as T. Boone Pickens and Ron Perelman win deals. Wasserstein’s M&A hijinks, however, came a cropper when he advised Robert Campeau, a previously unknown Canadian real-estate developer, to buy first Allied Stores Corporation and then Federated Department Stores, using other people’s money, including millions from First Boston. When Allied and Federated filed for bankruptcy, the together comprised the largest bankruptcy filing of all time. Creditors lost billions. First Boston lost hundreds of millions of dollars itself.

The end of Wasserstein’s career at First Boston came when he made a power play to become head of the bank. He failed, but triumphed by starting Wasserstein Perella & Co. with a bunch of First Boston’s superstars. But business started to get tougher at Wasserstein Perella in the aftermath of Wasserstein’s failed advisory assignments. The once-fawning financial press turned on him, and he became the brunt of jokes and less than flattering articles. In a cover story, Forbes magazine dubbed him “Bid ’Em Up Bruce.”

When his five-year contract was complete, Perella quit the firm, and left to his own devices, Wasserstein became more and more difficult to work with. The firm was losing steam, and the rumor was it could no longer meet its payroll. But the ever-canny Wasserstein figured out a way to sell the firm at the top of the market to Dresdner Bank, for $1.4 billion in 2000. He personally pocketed $600 million of profit. But soon he alienated his bosses in Germany an was looking for a way out. Allianz, which by then had bought Dresdner, paid Wasserstein his full $75 million three-year contract before the end of his first year to be done with him.

Shortly after September 11, 2001, Lazard patriarch David-Weill, who had tried twice previously to hire Wasserstein, finally convinced him to join Lazard as CEO.