EMPLOY PROFILE VAULT EMPLOYER PROFILE:
LEHMAN BROTHERS
© 2001 Vault Inc.
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EMPLOY PROFILE VAULT EMPLOYER PROFILE:
LEHMAN BROTHERS
BY THE STAFF OF VAULT
© 2001 Vault Inc.
Copyright © 2001 by Vault Inc. All rights reserved. All information in this book is subject to change without notice. Vault makes no claims as to the accuracy and reliability of the information contained within and disclaims all warranties. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, for any purpose, without the express written permission of Vault Inc. Vault, the Vault logo, and “the insider career networkTM” are trademarks of Vault Inc. For information about permission to reproduce selections from this book, contact Vault Inc., 150 W22nd Street, New York, New York 10011, (212) 366-4212. Library of Congress CIP Data is available. ISBN 1-58131-148-6 Printed in the United States of America
Lehman Brothers
Table of Contents INTRODUCTION
1
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 CEO's Bio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
THE SCOOP
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History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 Major Divisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 Vault Newswire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 Recent Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
OUR SURVEY SAYS
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Getting Hired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 Recruiting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 Interview Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28 Questions to Expect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29 Questions to Ask . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31 Pay and Perks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
ON THE JOB
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Day in the Life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33 Job Descriptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36 Career Path . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38 Training Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
FINAL ANALYSIS
43
RECOMMENDED READING
45
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Lehman Brothers
Introduction Overview Lehman Brothers has come a long way in a short time. The firm was purchased by financial services giant American Express in 1984 after suffering heavy financial losses and nearly going out of business. The firm was set free again in a public offering in 1994 and immediately encountered more financial troubles that necessitated the loss of approximately 2,000 jobs. Though it appeared Lehman was again on the brink of failure, the firm quickly rebounded and by 1999 was one of the most profitable firms on the Street. Lehman’s rebuilding and survival skills will be tested again. Already hurt by the economic slump of 2001, Lehman was one of the firms hardest hit by the terrorist attacks on the World Trade Center in September 2001. One of Lehman’s 618 World Trade Center employees was killed in the tragedy and the firm was forced to move most of its New York operations to its Jersey City office. The firm announced earnings of $309 million for the third quarter of fiscal 2001 in late September, down from $457 million for the same period in 2000. That total doesn’t include damages and loss of business from the attacks, which occurred just after the close of the quarter. It remains to be seen how Lehman — and the industry in general — will rebound from these attacks.
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Lehman Brothers Introduction
CEO’s Bio Richard Fuld, Jr.: Making the tough decisions A graduate of the University of Colorado and New York University, Richard S. Fuld joined Lehman in the 1960s when it was still a private partnership with $20 million in capital — compared to its $35 billion today. Fuld, who often tells people Lehman is the only place he’s ever worked, began to rise to the top of Lehman with his appointment as Vice Chairman in 1984, a post he held until 1990. From 1990 to 1993, Fuld served as president and co-chief executive of Lehman, and became chairman of the board in April 1994 when the company went public. Since then, he has steadily expanded the day-today management of the company, and runs it with a committee of six. A trader by background, Fuld has been strongly associated with Lehman’s hyper-aggressive attitude, and many see him as the very incarnation of the gung-ho Wall Street player. He also made some very difficult and unpopular decisions without flinching — including massive layoffs in 1994 and 1995. But he has gained the respect and admiration of Wall Street analysts for the progress the firm has made since going public. Annual earnings are almost 10 times what they were that first year, and there has been a major shift in business so that the firm is no longer weighted towards fixed income. For a guy with such a reputation for being tough, Fuld has a mushy side too. He is a trustee of Mount Sinai Medical Center, and a member of the Executive Committee of Mount Sinai Children’s Center Foundation. He’s also a Director of Ronald McDonald House. All of which suggests that one of Wall Street’s most competitive CEOs may be an old softie inside.
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Lehman Brothers
The Scoop History Southern roots The story of Lehman Brothers, like so many American success stories, begins with an ambitious immigrant. In the 1840s, Henry Lehman, a 23-year-old immigrant from Rimpar, Germany, arrived in New York City. After a year in New York, he left for Montgomery, Ala., to open a dry goods store. By 1850 his two younger brothers, Emanuel and Mayer, joined him, and the Lehman brothers opened for business. By accepting raw cotton in place of cash as payment for merchandise, the brothers were able to develop a thriving cotton business on the side in the heady days of the pre-Civil War cotton boom. Henry died in 1856, but the brothers’ business prospered, and in 1858, the firm opened an office in New York City. To survive the effects of the Civil War, the two younger Lehman brothers joined with John Durr to form Lehman, Durr & Co. This company prospered during the postwar years by playing a crucial role in the financing of Alabama’s reconstruction. Soon the firm began looking beyond the South. In 1870 it helped establish the New York Cotton Exchange; in 1887 Lehman acquired a seat on the New York Stock Exchange. Further development as a financial services firm A major landmark for the firm came just before the 20th century: in 1899, the firm underwrote its first IPO for the International Steam Pump Company. A more important venture came seven years later, when Lehman joined with Goldman Sachs to underwrite retailer Sears Roebuck’s IPO. Lehman was now under the management of the next generation of the family, which produced some of the most famous Lehmans. After serving from 1908 to 1929 as one of the partners of the firm, Herbert Lehman, one of the four sons of Emanuel, went on to become the governor of New York State (1933-42) and a U.S. senator (1950-56). Another famous Lehman, Robert Lehman (the grandson of Emanuel) entered the firm as a partner in 1921. In 1925 he became the firm’s leader, and continued as its head until his death in 1969. Robert Lehman not only established the firm’s reputation on Wall Street Looking for a new challenge? The Vault Finance Job Board has thousands of top jobs for all experience levels. Visit www.vault.com.
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Lehman Brothers The Scoop
through his legendary ability to raise large sums of money for clients, but also gathered one of the world’s most impressive private art collections of European Old Masters (now housed at New York’s Metropolitan Museum of Art in the Lehman Wing). By the 1930s, the firm had amassed sufficient experience and capital to survive the Great Depression. Even in the decade-long gloom of the Depression, the firm maintained its status as an innovator by pioneering private placements, which arranged loans between blue-chip borrowers and private lenders. At a time when the stock market was barely functioning, Lehman’s private placements enabled borrowers to find capital and investors to find an appropriate return. Lehman remained under family management until the death of Robert Lehman (the grandson of Emanuel) in 1969. In 1977 Lehman Brothers merged with Kuhn Loeb & Co., an investment firm with a prestigious past and an international clientele — it had financed the Japanese during the 1905 Russo-Japanese war and had arranged for a $150 million loan to be provided to Japan as earthquake relief after the 1923 Tokyo earthquake — thus creating Lehman Brothers Kuhn Loeb. The merged firm was one of the first champions of the health care and high-tech industries: in 1977 the firm became the dealer-manager and financial adviser in Humana Inc.’s $300 million acquisition of American Medicorp, which made Humana the secondlargest investor-owned hospital company. The ill-fated financial supermarket Lehman Brothers Kuhn Loeb was hurt by internal quarreling and outward woes. In 1984 the Mexican peso crisis, combined with a major slump in the bond market, nearly bankrupted the firm. The weakened firm was acquired by American Express Company, whose president, Sanford Weill, and CEO, James Robinson, wanted Lehman to become the investment banking branch of a financial juggernaut they dreamed of creating alongside the Shearson Loeb Rhodes retail brokerage and the Amex charge card. Despite the mass exodus of bankers from Lehman in the immediate wake of Amex’s acquisition of the company, Shearson Lehman soon took a more aggressive approach under Amex’s supermarket structure and turned in an improved performance (the revival of the economy no doubt helped). Shearson Lehman also began to expand overseas; in 1986 it gained a seat on the London Stock Exchange and in 1988 on the Tokyo Stock Exchange. However, Shearson 4
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Lehman Brothers The Scoop
Lehman’s results remained subpar — and the massive bonuses that the company gave its employees didn’t help its bottom line. Lehman’s aggressive business practices also came under close scrutiny; in April 1991, the company — without admitting or denying guilt — paid $750,000 to the New York Stock Exchange to settle accusations of wide-ranging trading violations at E. F. Hutton, which the firm had recently acquired. The firm lost money in 1990, 1992 and 1993. In 1992 American Express, as part of its effort to refocus on its core businesses, sold its retail brokerage to Primerica Corp. While Lehman kept its investment banking and capital markets units, it lost its asset management and its network of sales offices. That year, Lehman moved out of its 55 Water Street headquarters near Wall Street and into the World Financial Center. Free at last American Express spun off Lehman Brothers to stockholders and the public in 1994. Lehman Brothers Holdings Inc. became an independently owned company and began trading on the New York Stock Exchange. (As part of the spin-off agreement, Lehman pays American Express up to $50 million in dividends until May 2002.) After years in the shade of a corporate giant, Lehman’s headcount and infrastructure had grown too large for the company to make a profit. The restructuring of 1994 and 1995 cut $300 million in expenses and reduced the staff by 25 percent, from 9,400 to 7,700 employees — a number that peaked in later years at approximately 12,000 as the company expanded globally. I’ll be coming around again After a decade as the subsidiary of a financial giant, word on the Street periodically has Lehman coupling up again. An economic upturn in late 1998, healthy earnings, and speculation about a purchase of the bank by Chase Manhattan, Deutsche Bank, or Donaldson, Lufkin & Jenrette caused Lehman’s stock price to skyrocket. In mid-July 1998, the stock reached $85, but a market downturn in August reduced the stock’s price by half. In the 52 weeks from February 1998 to February 1999 the stock traded as low as $46 1/8 and as high as $85 9/16. After years of less than stellar returns, Lehman has recently been making the case that it again should be considered one of Wall Street’s top investment Looking for a new challenge? The Vault Finance Job Board has thousands of top jobs for all experience levels. Visit www.vault.com.
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Lehman Brothers The Scoop
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 approximately 12,000 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 eschewed large-scale layoffs — even as competitors such as Merrill Lynch were announcing broad staff cuts — and ended 1998 with record profits of $736 million. Profits increased to $1.13 billion in 1999 and $1.78 billion in 2000. Perhaps more importantly, the company posted a return on equity of 27.4 percent in 2000. ROE is an important number for Wall Street firms and Lehman is mindful of maintaining a good ratio. The firm reportedly calculates ROE for 175 units and holds managers accountable for how they use capital. “I am running our business on return on equity,” Lehman’s CFO, David Goldfarb, told the Financial Times. “I have guys falling all over themselves to give back their equity.” In a replay of 1998, Lehman’s lean philosophy allowed it to avoid the layoffs that swept the investment banking industry in late 2000 through 2001. Merging firms such J.P. Morgan Chase and Credit Suisse First Boston laid off thousands of workers while other bulge bracket competitors such as Goldman Sachs and Morgan Stanley made smaller cuts. “Because of consolidation [other firms] are losing their way,” Richard Fuld told the Financial Times. “We have so many CVs [resumes]. We have been inundated.” Hi, Fidelity In June 1999, Lehman Brothers announced an alliance with Fidelity Investments, the Boston-based asset management and mutual fund firm, to provide Fidelity customers access to Lehman-led debt and equity offerings as well as Lehman’s research products. As a result of the partnership, Lehman could access a larger distribution network for public offerings and presumably attract more deals from companies eager to issue new securities. At the time of the announcement, the partnership yielded speculation that the two firms would merge. The rumors disappeared shortly after the announcement, only to resurface a year later. The Wall Street Journal, which first resurrected the rumors in June 2000, conceded that the merger was “a long shot” and opined that formalization of the Lehman/Fidelity distribution 6
© 2001 Vault Inc.
Lehman Brothers The Scoop
alliance was more likely. A Fidelity spokesman quashed the gossip, telling The New York Times, “We have no such plan[s] and there is nothing under discussion.” In July 2000, Lehman boosted its private client business, acquiring SG Cowen’s high net worth business. According to The Wall Street Journal, the deal was worth $50 million, much of which was money set aside for retention bonuses for the 140 SG Cowen brokers joining the Lehman team. Big-league clients Lehman has a client list befitting its status as a top-tier investment bank. In 2000 Lehman was involved in 191 equity transactions worth $88 billion, including 32 IPO in which the firm served as lead manager. Lehman’s M&A advisory group participated 223 deals worth $340 billion, generating $777 million in fees for the firm. Finally, Lehman’s fixed income underwriting group lead managed $155.0 billion in debt offerings. Lehman led a $1.5 billion convertible and common stock offering for Cendant, a $2.3 billion convertible securities offering for Tecnost/Telecom Italia and a $617 million IPO for Tele1 Europe Holding. Lead-managed debt offerings included a $5.75 billion offering for Wal-Mart, named “U.S. Dollar Bond Deal of the Year” and “U.S. Investment-Grade Corporate Bond Deal of the Year” by International Financing Review. The firm also managed a $2.8 billion offering for Ford Motor, a $2.3 billion offering for Pepsi Bottling Group and a $1.25 billion offering for Liberty Media Group. M&A transactions of note include the MediaOne/AT&T merger. (Lehman represented MediaOne in the $63.1 billion merger, completed in June 2000.) The bank also advised US West on its $48.5 billion pairing with Qwest Communications.
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Lehman Brothers The Scoop
Major Divisions Lehman groups its activities into three main units: investment banking, capital markets and client services. Investment Banking Lehman Brothers’ investment banking unit had a strong 2000 despite adverse market conditions, pulling in fees of $2.2 billion. The firm had over 2,000 bankers worldwide in 2000, an increase of nearly 500 from the previous year. Investment banking at Lehman can further be broken down into three groups: mergers and acquisitions /strategic advisory, equity financing and debt financing. Capital Markets In 2000 Lehman Brothers combined its equities and fixed income divisions into one unit — capital markets. Capital markets integrates the efforts of sales, trading and research. The equities division had $2.6 billion in revenues in 2000 and employed over 1,740 people. The firm makes markets in 2,000 listed stocks and 500 Nasdaq issues. Fixed income pulled in $2.1 billion in revenue in 2000. The firm underwrites and trades corporate investment grade and high-yield debt and government bonds. Lehman’s research unit has approximately 800 professional worldwide and is consistently feted by the business press for its prowess. The firm’s equity research team was a respectable eighth in Institutional Investor’s 2001 All America equity research rankings with 31 rated analysts. The fixed income team is the firm’s strength, however. Lehman came in first in II’s fixed income rankings in 2001, the second year in a row Lehman captured the top spot. Lehman had 35 ranked analysts, including 12 first teamers. Client Services Client services is a broad unit that includes Lehman’s private client services group and its private equity division. The PCS division, which got a boost from the June 2000 acquisition of SG Cowen’s retail division, had revenues of $795 million. The average commission for a Lehman PCS representative was $2.1 million. The private equity division manages over $4.5 billion in 8
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Lehman Brothers The Scoop
capital (as of the end of 2000) and makes four types of investments: merchant banking (which focuses on established companies), venture capital (smaller, riskier firms), communications (early-stage firms in the communications space) and real estate.
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Lehman Brothers The Scoop
Organization Locations
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U.S. locations
International locations
• New York, NY (Global HQ) • Jersey City, NJ (Temporary HQ) • Atlanta, GA • Boston, MA • Chicago, IL • Columbus, OH • Dallas, TX • Houston, TX • Los Angeles, CA • Menlo Park, CA • Philadelphia, PA • San Francisco, CA • Seattle, WA • Washington, DC
• London, UK (European HQ) • Tokyo, Japan (Asian HQ) • Amsterdam, The Netherlands • Bangkok, Thailand • Beijing, China • Buenos Aires, Argentina • Frankfurt, Germany • Hamilton, Bermuda • Hato Rey, Puerto Rico • Hong Kong • Jakarta, Indonesia • Madrid, Spain • Melbourne, Australia • Mexico City, Mexico • Milan, Italy • Montevideo, Uruguay • Munich, Germany • Paris, France • Rome, Italy • Sao Paulo, Brazil • Seoul, South Korea • Singapore • Stockholm, Sweden • Taipei, Taiwan • Tel Aviv, Israel • Toronto, Canada • Zurich, Switzerland
© 2001 Vault Inc.
Lehman Brothers The Scoop
Key officers Chairman and CEO: Richard S. Fuld, Jr. Chief Executive Officer, Lehman Brothers Asia: Jasjit S. Bhattal Chief Executive Officer, Lehman Brothers Europe and Asia: Jeremy M. Issacs Head of Corporate Strategy and e-Commerce: James A. Rosenthal Head of Global Investment Banking: Bradley H. Jack Co-Head of Global Equities: Roger B. Nagioff Co-Head of Global Equities: Robert S. Shafir Co-Head of Global Fixed Income: Theodore P. Janulis Co-Head of Fixed Income: Herbert H. McDade, III Head of Global Capital Markets: Jeffret Vanderbeek Head of Private Equity: Michael J. Odrich Senior Global Client Relationship Manager and Head of Private Client Group: Stephen M. Lessing Chief Financial Officer: David Goldfarb Chief Administrative Officer: Joseph M. Gregory Chief Human Resources Officer: Roberto Llamas Chief Legal Officer: Thomas A. Russo Ownership As a result of its Restricted Stock Unit program, under which each Lehman employee receives a percentage of total compensation in stock options, Lehman Brothers is today 33 percent owned by its employees (up from 4 percent in 1994). Lehman trades on the New York Stock Exchange under the symbol LEH.
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Lehman Brothers The Scoop
Vault Newswire October 2001: Lehman makes a deal to stay in New York Less than a month after being forced to scramble for space in the wake of the World Trade Center attacks, Lehman Brothers made a deal to purchase a 32story building in midtown Manhattan from rival Morgan Stanley. The purchase price wasn’t disclosed, but The Wall Street Journal reported that Lehman paid approximately $650 million for one million square feet of space. The deal enables Lehman to keep 5,000 jobs in New York — some firms displaced by the attacks had considered property in New Jersey — but exacerbated concerns that securities firms would abandon the downtown area. Lehman had little space that was actually destroyed; much of its office space wasn’t in the Twin Towers but was in the nearby World Financial Center. Lehman’s offices there sustained heavy damage and would not have been available for use for at least a year. “While the World Financial Center has been a terrific home for all of us … we simply can not wait that long,” CEO Richard Fuld told employees in a letter announcing the office purchase. September 2001: Lehman displaced by World Trade Center attacks One Lehman employee died in the September 11th terrorist attack on the World Trade Center, and the firm was forced to abandon its offices in the World Financial Center. Much of the firm’s operations were moved to Jersey City, N.J. The firm also temporarily located 1,000 employees in 650 rooms in a Manhattan hotel. The company eased employees back into the workforce. “People saw things they shouldn’t have seen,” Bradley Jack, the firm’s head of investment banking, told the Financial Times. “We told people to do what they are capable of doing. They have to come back at their own pace.” March 2001: Bond analyst goes to hedge fund Ravi Suria, a Lehman Brothers bond analyst, left the firm for Duquesne Capital. Suria was one of the first analysts to questions Amazon.com’s business model. In the summer of 2000, Suria expressed doubts about Amazon’s credit worthiness. January 2001: Lehman posts strong results Lehman Brother reported revenues of $26.4 billion, an increase of 39.3 percent from the previous year, and net income of $1.8 billion, an increase of 56.8 percent from fiscal 1999. 12
© 2001 Vault Inc.
Lehman Brothers The Scoop
July 2000: Lehman acquires SG Cowen’s private client group The Wall Street Journal reports that Lehman has paid $50 million for the group, including money earmarked for retention bonuses for the 140 SG Cowen brokers coming over in the deal. June 2000: Rumors of a Lehman/Fidelity merger resurface A Fidelity spokesman denies the rumors and The Wall Street Journal has said an expansion of the two firms’ earlier agreement was more likely. October 1999: Lehman hires health care banking team from Bear Stearns The firm brings on board a six-person team of senior bankers from Bear Stearns to expand its health care banking group, including a new co-head of health care banking. August 1999: Moody’s Raises Lehman Brothers’ rating Citing increased profitability, risk management strength, and a diversified business mix, Moody’s has upgraded Lehman Brothers’ ratings to “A.” July 1999: Lehman poaches senior bankers from Merrill Lynch to grow financial services group Lehman Brothers has hired a team of nine bankers from Merrill Lynch, including the former co-head of Merrill’s U.S. financial services group. The team includes three managing directors. June 1999: Lehman in major partnership with Fidelity Lehman Brothers has announced a partnership with mutual fund leader Fidelity Investments designed to take advantage of Fidelity’s strength with smaller (retail) investors. Through the partnership, Fidelity’s clients would be able to buy the securities offerings Lehman underwrites (including IPOs) on the Internet. Fidelity’s discount brokerage service is the second-largest in the country, and much of its business is conducted online. The company has 2.7 million online retail brokerage accounts, with about $447 billion in client assets. Fidelity’s clients will also be able to access some of Lehman’s research products online. The deal replaces a similar one struck between Fidelity and Salomon Smith Barney two years ago that has become less important to Salomon due to its acquisition by Citigroup (which is attempting to boost its own Internet sales efforts).
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Lehman Brothers The Scoop
June 1999: Lehman reports record earnings for second quarter Lehman Brothers has posted record net income of $330 million for its second quarter. March 1999: Lehman has new health care head Lehman has hired a new head of health care banking to replace Mary Tanner, who stepped down several months ago as group head to become a senior mergers banker. Gary Weinstein, a senior executive at biomedical instrument leader Thermo Electron, will head the group. January 1999: Lehman reports record earnings — again Lehman Brothers reported record net income of $736 million for 1998, a 14 percent increase from 1997. The firm’s revenue for the year was also a record at $4.1 billion, a 6 percent increase from the prior year.
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Lehman Brothers The Scoop
Recent Transactions • Lehman co-led (along with ABN AMRO Rothschild) a $144 million IPO for General Maritime in June 2001. • The firm led a $420 million IPO for P&L Coal Holdings in May 2001. • In February 2001, Lehman was the lead manager for ATP Oil & Gas Corp.’s $84 million IPO. • Lehman lead managed a $70 million IPO for Kosan Biosciences in October 2000. • In August 2000, Lehman Brothers led a $92.4 million IPO for Pemstar, Inc. • In a deal that closed in June 2000, Lehman advised MediaOne Group on its $51.9 billion acquisition by AT&T. • The firm advised R.J Reynolds Holdings on its $15.2 billion purchase of Nabisco Group Holdings; the deal was announced in June 2000. • Lehman Brothers advised BellSouth on its joint venture with SBC Communications. The venture created Cingular Wireless and was announced in April 2000. • The firm was the lead manager for a $616.6 million IPO for Tele1 Europe Holding in March 2000. • The company led a $444.4 million offering for Spanish Broadcasting Systems in October 1999. • In September 1999, Lehman led an IPO for Williams Communications Group worth $680.8 million. That same month, the bank had led a $76 million offering for Alteon Websystems. • Lehman advised Olivetti in its highly publicized hostile takeover of Telecom Italia in 1999. During the takeover, which was completed in May 1999, Telecom Italia, a former state monopoly, attempted to defend itself by merging with Deutsche Telekom. Olivetti eventually paid $33 billion for a majority stake of Telecom Italia, and sold Olivetti’s interests in cellular and fixed-line networks. • In one of the largest deals of the first half of 1999, Lehman Brothers advised US West in its merger with Qwest. Looking for a new challenge? The Vault Finance Job Board has thousands of top jobs for all experience levels. Visit www.vault.com.
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Lehman Brothers The Scoop
• Lehman lead managed Software AG’s $500 million IPO in April 1999. The offering was the largest IPO in the software industry’s history.
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© 2001 Vault Inc.
Lehman Brothers
Our Survey Says Life at Lehman Lehman bankers report working long hours. However, the opportunity to work on top-notch deals seems to ease some of the pain. “I work more than my friends at other firms, as do most of the people in my group, but it is because the group is aggressively gaining market share faster than we are adding people,” a contact tells us. “We are constantly competing for the best assignments in the industry,” boasts one banker. “I am very proud of both the number and the quality of the deals I have had an opportunity to work on.” Additionally, sources describe Lehman as being comprised of “highly motivated colleagues” who “feel like partners in the franchise.” If there is a downside to life at Lehman, employees say it could be the perception that the firm, which has been climbing the rungs of the league tables in last few years, is still not on par with Goldman Sachs and Morgan Stanley. Effort rewarded Perhaps the most attractive aspect of working for Lehman, employees say, is that “the firm rewards effort. This place is as close to a meritocracy as it gets.” An associate calls the company’s culture “fluid,” commenting that “managers tend to move around the firm.” “I’ve been given more responsibility than I’d ever imagined,” says one associate in trading. Another associate in Lehman’s fixed-income group calls the firm “an aggressive firm that will let you take risk, if you can justify it.” According to one capital markets associate, “[Lehman gives] lots of responsibility early. They push employees to progress quickly.” Another associate in that area boasts, “The opportunity is fantastic. The firm has focused on a number of growth opportunities and is aggressive about getting people involved.” That doesn’t mean analysts are free of cumbersome tasks. One I-banking analyst warns, “It’s easy to get pigeonholed into doing a lot of pitches.” Insiders generally report a “young culture” that is “very entrepreneurial.” Reports one insider, “The firm is very open to people moving around departments where it makes sense; they don’t really mess around — if something makes sense, they just do it.” One Lehman analyst complains the firm is a little behind the bulge bracket in terms of pay, though the bank did come through with raises in response to recent competitor increases. FirstLooking for a new challenge? The Vault Finance Job Board has thousands of top jobs for all experience levels. Visit www.vault.com.
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Lehman Brothers Our Survey Says
year analysts received 40 percent raises, second-years 45 percent and thirdyears 54 percent. Lehman also offers a leveraged investment account for all employees. 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,” according to 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.” “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.” Says one analyst in the firm’s research department: “It’s warm and less intense than your typical Wall Street firm.” Some insiders believe the firm’s culture and growth story are selling points to employees at competitor firms. Explains one Ibanking analyst, “We’re getting more people from top-tier firms like Morgan Stanley and Goldman interested in us.” Frat brothers Although Lehman may be laid-back in the sense of not being stuffy, that doesn’t mean tempers don’t flare. 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.” According to one: “Antics are somewhat unprofessional. Many employees have something of a locker-
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© 2001 Vault Inc.
Lehman Brothers Our Survey Says
room, fraternity culture.” Reports another: “It’s meritocratic but can be easily abused by overly aggressive people.” Another associate says, “This is definitely a culture of a work ethic — they put in the hours.” Still, insiders generally note the firm has been receptive to recent changes in the industry. In addition to salary and expense improvements, one insider notes that “management is showing more of an interest in people having well-rounded lives.”
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Lehman Brothers
Getting Hired Recruiting Good impressions count First impressions are key at Lehman. After meeting students at colleges and business schools, the firm’s recruiters will hone in on 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. Lehman focuses on 10 graduate business schools (Chicago, Columbia, Wharton, Tuck, Fuqua, Stern, UCLA, Kellogg, Harvard and MIT) for recruiting MBAs. For analysts, Lehman conducts on-campus interviews at top-20 schools but considers candidates from other schools. A Lehman analyst from a top-20 school reports, “We do hire a lot of write-ins.” Playing the game How does Lehman select its candidates? In part, through on-campus get-toknow-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. 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 the ulterior motives, the firm tries to keep the events as informal and social as possible, insiders say: “The focus is on personalities.” A banker who was hired to fill a vacant position in the firm’s London office had interviews with three managers. Of course, this contact says, the process was much faster than for new graduates. Like the summer programs at most bulge-bracket firms, Lehman’s summer associate programs act as a feeder system for full-time hires. Summer associates receive their offers within two weeks of the end of the program. Most associates report an excellent recruitment process. Says one: “There was no bullshit in the recruiting process. They were honest with us.” Interested candidates should visit the firm’s web site, www.lehman.com, which is chock full of detailed recruiting information, including a list of contacts for several departments.
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Lehman Brothers Getting Hired
Analysts and associates begin their careers at Lehman with a five-week training program in New York. Associates then move on to three one-month rotations in various departments. Regional associates may elect to spend a year in New York before being assigned to a permanent group in their home office, while analysts are immediately placed in a group. Qualifications When recruiting analysts, Lehman Brothers does not look for particular majors. The firm accepts candidates from a wide range of academic backgrounds, as long as candidates demonstrate a fierce interest in (and aptitude for) finance and business. When hiring associates, the firm looks for recent MBAs with excellent academics and solid work experience in finance. Lehman Brothers hosts a recruiting hotline at (800) 821-7126. Resumes and cover letters should be directed to the contact persons responsible for each department. The appropriate contact addresses are: (Note: for contacts in the United States, please call the recruiting hotline.) Investment Banking & Private Equity Associate Recruiting Bess Frank 3 World Financial Center, 24th Floor New York, NY 10285
[email protected] Analyst Recruiting Candace Darling 3 World Financial Center, 24th Floor New York, NY 10285
[email protected] Associate Recruiting, Europe Doreen Bell One Broadgate London EC2M 7HA, England
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Lehman Brothers Getting Hired
Analyst Recruiting, Europe Joanna Links One Broadgate London EC2M 7HA, England
[email protected] Associate and Analyst Recruiting, Japan Ayumi Yamamoto Ark Mori Building, 36th Floor 12-32, Akasaka I-chome Minato-ku, Tokyo 107, Japan
[email protected] Associate and Analyst Recruiting, Hong Kong Pamela Ferguson & Pauline Yu One Pacific Place 88 Queensway Hong Kong
[email protected] Sales, Trading and Research Associate Recruiting Stefanie Amanatides 3 World Financial Center, 8th Floor New York, NY 10285
[email protected] Analyst Recruiting Kathleen Frisina 3 World Financial Center, 8th Floor New York, NY 10285
[email protected] Associate Recruiting, Europe Sharon Bertie One Broadgate London EC2M 7HA, England
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Lehman Brothers Getting Hired
Analyst Recruiting, Europe Lisa-Jane Ryan One Broadgate London EC2M 7HA, England
[email protected] Associate and Analyst Recruiting, Japan Melinda Chen & Gary Cox Ark Mori Building, 36th Floor 12-32, Akasaka I-chome Minato-ku, Tokyo 107, Japan
[email protected] Associate and Analyst Recruiting, Hong Kong Melinda Chen & Gary Cox One Pacific Place 88 Queensway Hong Kong
[email protected] Public Finance Associate and Analyst Recruiting Arthur Chan 3 World Financial Center, 20th Floor New York, NY 10285
[email protected] Private Client Services Associate Carrie Higginbotham 1 World Financial Center, 28th Floor New York, NY 10281
[email protected] Operations and Corporate Services Operations Analyst Recruiting Theresa Trevett 101 Hudson Street, 29th Floor Jersey City, NJ 07032
[email protected] 24
© 2001 Vault Inc.
Lehman Brothers Getting Hired
Operations Internship Program, U.S. Shannon Kinne 101Hudson Street, 29th Floor Jersey City, NJ 07032
[email protected] Recruiting, Europe Rachael Bayley One Broadgate London EC2M 7HA, England
[email protected] Associate and Analyst Recruiting, Japan Roger Goble Ark Mori Building, 36th Floor 12-32, Akasaka I-chome Minato-ku, Tokyo 107, Japan
[email protected] Recruiting, Hong Kong Roger Goble One Pacific Place 88 Queensway Hong Kong
[email protected] Finance Associate and Analyst Recruiting Geneane Bloomfield 1 World Financial Center, 19th Floor New York, NY 10281
[email protected] Recruiting, Europe Vince Rapley One Broadgate London EC2M 7HA, England
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Lehman Brothers Getting Hired
Associate and Analyst Recruiting, Asia David Egliskis Ark Mori Building, 36th Floor 12-32, Akasaka I-chome Minato-ku, Tokyo 107, Japan
[email protected] Information Technology Experienced Recruiting Nick Tsororos 1 World Trade Center, 40th Floor New York, NY 10048
[email protected] Analyst Recruiting Nick Tsororos 1 World Trade Center, 40th Floor New York, NY 10048
[email protected] Recruiting, Europe Anne-Marie Duncan One Broadgate London EC2M 7HA, England
[email protected] Associate and Analyst Recruiting, Japan Jeffrey Peel Ark Mori Building, 36th Floor 12-32, Akasaka I-chome Minato-ku, Tokyo 107, Japan
[email protected] Recruiting, Hong Kong Junos Yiu One Pacific Place 88 Queensway Hong Kong
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Lehman Brothers Getting Hired
Credit Risk Management Associate and Analyst Recruiting Lauren Miller 1 World Financial Center, 19th Floor New York, NY 10281
[email protected] Human Resources Human Resources Lori Blankstein 3 World Financial Center Lobby Level New York, NY 10285
[email protected] Human Resources, Europe Jim Richardson One Broadgate London EC2M 7HA, England
[email protected] Human Resources, Asia Mark Militello Ark Mori Building, 36th Floor 12-32, Akasaka I-chome Minato-ku, Tokyo 107, Japan
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Lehman Brothers Getting Hired
Interview Process Lehman’s interview process is not as lengthy as those at some other major investment banks. While interview format varies from department to department, the interview process usually consists of three rounds or fewer. The first round of interviews is held on campus and lasts for half an hour. One recent interviewee states that “the interview was definitely ‘colder’ and less friendly than most other investment bank interviews I had experienced. The interviewer seemed primarily interested in my technical finance skills and not in personality or fit.” However, this interview report is an anomaly. Most firm associates and analysts describe the warmth of the interviewing process as a major reason for choosing the firm. “They seemed more interested in the ‘good guy’ factor. I never sweated an interview at Lehman,” says one associate. Says one analyst: “It seems that Lehman Brothers makes an effort to ascertain ‘people skills.’” The second and third rounds are held at Lehman’s offices, and consist of several half-hour interviews with associates, vice presidents, and a managing director or two. Lehman makes its employment decisions quickly; a job offer is usually extended on the night of the last round of interviews or the day after. In some cases, the last interview is with the managing director in charge of hiring, and an offer will be extended during that interview. Here’s one recent associate hire’s explanation of the process he went through: “[We did] the on-campus interview, and we found out a week later whether we were supposed to come back to New York. I interviewed with six people. The sixth was with a managing director who was in charge of hiring, and he extended an offer.”
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Lehman Brothers Getting Hired
Questions to Expect 1. Why Lehman Brothers? Says one insider: “We want people who want us. We have a generalist program, so applicants don’t need to understand specific businesses.” 2. Company A is considering acquiring Company B. Company A’s P/E ratio is 55 times earnings, whereas Company B’s P/E ratio is 30 times earnings. After Company A acquires Company B, will Company A’s earnings per share rise, fall, or stay the same? “There were a couple of quant questions, no more or no less than any of the questions that I got at any of the other places,” says one capital markets summer associate. “They just want to make sure that you know the markets and stuff.” Here’s the answer to this particular question: Company A’s earnings-pershare will rise, because of the following rule: when a higher P/E company buys a lower P/E company, the acquirer’s earnings-per-share will rise. The deal is said to be “accretive,” as opposed to “dilutive,” to the acquirer’s earnings. You should know this rule cold. When your interviewer asks you for your reasoning process, you must mention this general rule. Otherwise, even if you arrive at the right answer (through a different rule), your answer won’t be good enough. 3. “Walk me through the major line items on a Cash Flow Statement.” First, the Beginning Cash Balance, then Cash from Operations, then Cash from Investing Activities, then Cash from Financing Activities, then the Ending Cash Balance.” 4. Have you followed any stock recently? Did you decide to buy it? Why? A test of your ability to analyze companies (and your genuine interest in the industry). 5. What financial products capital markets areas are you interested in? Fixed income or equity? A key question for those looking to work in capital markets at Lehman, because candidates can be assigned to either equity or fixed income. “You have to be flexible,” says one insider. “You have to be open to working on Looking for a new challenge? The Vault Finance Job Board has thousands of top jobs for all experience levels. Visit www.vault.com.
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Lehman Brothers Getting Hired
either side of the firm, if someone wanted to do fixed-income derivatives since they were five, they might want to look somewhere else.” 6. Why are you interested in investment banking? If you have no previous experience on Wall Street, you are guaranteed to get this question. The primary purpose of this question is to weed out those who are interested in banking solely for the money. Even if that is your primary interest, you’d better have a better answer planned. Try discussing your longheld love of finance, how you have followed the markets for years and find them fascinating, and how you love the idea of combining your love of numbers with your entrepreneurial drive in order to win business for the firm.
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© 2001 Vault Inc.
Lehman Brothers Getting Hired
Questions to Ask 1. Can you tell me a little bit about the firm’s training and rotation programs? Again, Lehman is proud of its generalist programs, so you should sound enthusiastic about the opportunity to explore different parts of the firm. 2. How does Lehman’s independence help it? You could ask questions about takeover rumors, but if you want to do some brown-nosing, here’s a good way to discuss the current merger-mania among financial services firms, and Lehman’s unwed status. They’ll tell you that the firm’s independence has created a culture that ultimately benefits shareholders and clients by having its employees think and act like owners — which they are, through the firm’s stock compensation programs. 3. Why does Lehman pursue a generalist strategy for hiring in capital markets? Another brown-nose question. 4. How does the alliance with Fidelity Investments help the firm? A question that your interviewers will love answering. Through the deal Fidelity’s retail clients has access to Lehman’s stock and bond offerings and research. The deal provides Lehman with a retail and Internet distribution system that rivals any in the industry, and thus should give Lehman’s bankers leverage when pitching potential clients for underwriting business. 5. How much responsibility can I expect at Lehman? Make it easy on your interviewers, they’ll appreciate it — early responsibility is one of the key selling points that Lehman makes to its recruits.
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Lehman Brothers Getting Hired
Pay and Perks Pay Analyst: 1st year: $40,000 + bonus Associate: 1st year: $80,000 + $25,000 sign-on bonus + $25,000 year-end bonus + $7,500 moving expenses Perks • Four weeks paid vacation • Cellular phone • Daily dinner allowance • Occasional tickets to sporting and cultural events • Car service when returning home late
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© 2001 Vault Inc.
Lehman Brothers
On the Job Day in the Life Associate, Investment Banking 8:00 a.m.
Pick up work from word processing, review it, make changes. (“My job is basically to make sure that everything on a deal gets done. This means whatever is necessary — putting together pitchbooks, talking to clients, you name it.”)
8:30 a.m.
Check voice mail, return phone calls.
9:00 a.m.
Eat breakfast; read The Wall Street Journal.
10:00 a.m. Prepare pitchbook, discuss analysis with members of deal team. (“It’s usually me and an analyst and a VP.”) 12:00 p.m. Conference call with members of IPO team, including lawyers and client (“There’s a lot of talking to other people in the firm who have expertise, talking to legal counsel, talking to clients. It’s a lot of time spent on the phone.”) 1:00 p.m.
Eat lunch at desk after getting it at the cafeteria. (“It’s a good cafeteria, you can get pretty much anything. It’s subsidized, definitely less expensive than what you get around [the area] — maybe five bucks.”)
2:00 p.m.
Work on restructuring case studies; make several document requests from company library. (“When it’s busy, associates work on maybe three to six deals at a time. In slow times, when the market’s down, it’s maybe zero to three deals.”)
3:30 p.m.
Receive documents and start to prepare analysis.
4:15 p.m.
Pause to take call from client. (“Most of the client contact is dayto-day client management, answering questions about a deal.”)
5:00 p.m.
Check in with vice presidents/heads of deal teams on status of work. (“When it comes to actually making presentations to clients, usually it’s the VP or Senior VP who does most of the talking, but I’ll chime in here and there.”)
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Lehman Brothers On the Job
6:45 p.m.
Dinner at desk.
8:00 p.m.
Meet with VP again; receive feedback on pitchbook.
9:00 p.m.
Make pitchbook revisions.
11:00 p.m. Submit revisions to word processing. 11:30 p.m. Call car service and head home. Associate, Sales-Trader 6:30 a.m.
Get into work. Check voice mail and e-mail. Chat with some people at your desk about the headlines in the Journal.
7:15 a.m.
Equities’ morning call. You find out what’s up to sell. (“I’m sort of a liaison between the accounts [clients] and the block traders. What I do is help traders execute their trading strategies, give them market color. If they want something I try to find the other side of the trade. Or if I have stuff available, I get info out, without exposing what we have.”)
9:30 a.m.
Markets open. You hit the phones. (“You want to make outgoing calls, you don’t really want people to call you. I’m calling my clients, telling them what research is relevant to them, and what merchandise I have, if there’s any news on any of their positions.”)
10:00 a.m. More calls. (“I usually have about 35 different clients. It’s always listed equities, but it’s a huge range of equities. The client can be a buyer or seller — there’s one sales-trader representing a buyer, another representing the seller.”) 10:30 a.m. On the phone with another Lehman trader, trying to satisfy a client. (“If they have questions on another product, I’ll try to help them out.”) 11:00 a.m.
Calling another client. (“It’s a trader at the other end, receiving discussions from portfolio manager; they’re discretion varies from client to client.”)
12:00 p.m. You hear a call for the sale for a stock that several of your clients are keen on acquiring. (“It’s usually a block trader, although sometimes it’s another sales-trader. The 34
© 2001 Vault Inc.
Lehman Brothers On the Job
announcement comes ‘over the top’ — over the speaker. It also comes on my computer.”) 12:30 p.m. Food from the deli comes in. (“It’s a very time-sensitive job. You can’t go to the bathroom sometimes — say you’re working 10 orders, you want to see every stock. We don’t leave to get our lunch, we order lunch in.”) 1:00 p.m.
Terminal watching. (“There’s a lot of action. If there’s a 200,000-share trade in your name [a stock that a client has a position in or wants] and it’s not you, you want to go back to your client and say who it was.”)
2:00 p.m.
Taking a call from a client. (“It’s very time-sensitive and you can’t miss a beat — you are literally in your seat all day.”)
2:05 p.m.
You tell the client that you have some stock he had indicated interest in previously, but you don’t let him know how much you can unload. (“It’s a lot of how to get a trade done without disclosing anything that’s going to hurt the account. If a lot on one stock is up you don’t want the whole Street to know, or it’ll drive down the price.”)
4:30 p.m.
Head home to rest a bit before going out. (“I leave at 4:30 or sometimes 5:00. It depends.”)
7:00 p.m.
Meet a buy-side trader, one of your clients, at a bar. (“We entertain a lot of buy-side traders — dinner, we go to baseball games, we go to bars. Maybe this happens once or twice a week.”)
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Lehman Brothers On the Job
Job Descriptions Analyst, Investment Banking An investment banking analyst conducts financial analysis and research for the department. In the course of an average week, an analyst may be involved in projects such as a request for proposals (RFP), debt profiles for refinancing purposes, pricings, and one or two longer projects such as a fairness option. The analyst usually works as a member of a deal team. “They mostly do things that associates or VPs tell them to do,” explains one insider, “but sometimes they will do things on their own.” Analyst, Sales and Trading There are about 70 analysts in the firm’s sales, trading & research analyst class, who, according to insiders can grab as much responsibility as they like. Says one associate trader: “I don’t think the role between analysts and associates is that different. You basically get as much responsibility as you can — it might take the analysts a little longer to get up to speed, but in general, that’s the case.” This, however, doesn’t mean that they’re all happy. “For the sales and trading analyst class, retention will be extremely low,” predicts one recently-hired analyst, “due to low pay and a generally poorly run program.” Although analysts and associates are hired into capital markets as generalists, says one insider, “you do come in with some perspective on what function you should have.” Does the firm have such a perspective? “I don’t think they will say that, but the reality is yes. I would say there’s overlap between trading and research, but you’re either a sales person or not a sales person.” Summer Associate, Capital Markets Sales & Trading summer associates help traders answer calls, track down phone numbers and company contacts, and poll salespeople in other departments to determine account overlaps. After a few weeks on the job, the summer associate helps obtain bids and offers from clients. Summer associates in the capital markets department also note that “the summer is structured well in terms of desk placements, training sessions and social events.” One remarks: “I walked in on my first day with a calendar of 36
© 2001 Vault Inc.
Lehman Brothers On the Job
events for the full 10 weeks, including two five-week placements, 10 one-day rotations, and numerous after-hours social events.” The two five-week rotations split the summer between debt and equity. “They hire people in a generalist program, not for a specific desk,” elaborates one recent summer associate. “You do two rotations, one on the equity side, one on the fixed income side. Wednesday is rotation day. Each week, you spend Wednesday on a different desk.” Friday is classroom day — a specialist from one of the firm’s groups will come up and talk to the summer associates about his or her particular area. However, those who are hired into the firm’s private client services do not rotate. Social events in the summer include softball games and weekly brown bag lunches. Says one participant, “We went out on average three times a week — they took us to the Yankees [and] to the Giants. With the admin folks.” “We played softball, bowled, and they took us to this outward bound thing, where we went to upstate New York,” reports one Capital Markets summer associate. “The very first day of the internship, on a Monday, we went on a retreat. You’re doing team-building exercises, your standard touchy-feely team-building things.” These touchy-feely exercises include such things as building a container for an egg drop out of six straws. “It was pretty cool. Although some of the stuff was painful while you’re doing it, it does help you to get to know people.” Lehman organizes its business areas by product area rather than function or geography. For example, rather than having a sales and trading department, a research department, and so on for both equities and debt, the firm has a fixed income and equities group that is divided into Sales, Trading and Research divisions. This is how it is explained in firm literature. But in practice, analysts and associates come into what is termed “capital markets,” and analysts continue to talk about “sales and trading analyst classes.”
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Lehman Brothers On the Job
Career Path For undergraduates Recent college graduates enter a two-year analyst program at Lehman. Seemingly parroting the company brochure, one analyst reports that “the program offered an amazing opportunity to explore the financial world.” Lehman invites its best analysts to stay for a third year. Lehman offers a tuition-reimbursement program for those analysts who are given offers to rejoin the firm as associates after business school. Lehman also provides assistance to those considering business school by providing on-site GMAT preparation courses. “On the sell-side,” insiders say, “you can advance to associate without an MBA. It just takes a few years — maybe three or four years.” Another insider reports that “it’s possible” to advance indefinitely without an MBA in capital markets. “I think on the banking side, it’s much more difficult. On the sales side, it’s quite reasonable.” For those who don’t get an offer to return for a third year or to go to business school, says one insider: “They don’t have to encourage you to leave, they just tell you — there are no obligations.” For MBAs Lehman’s promotion policy for I-banking associates was quite structured, but the company states it is moving away from set advancement schedules. Associates in I-banking used to make vice president in three and a half years (including training). For example, those who joined in August 1994 would be scheduled to make the VP level in March 1998. “Probably like 90 to 95 percent who stick around make it,” says one associate. “If you’re not going to make it, you’ll know before you’re in your fourth year.” How will supervisors let associates know that they should look elsewhere? “They won’t have you do any serious work.” Although associates can stay if they are not promoted in their fourth year and can be promoted late, insiders report, they shouldn’t expect it. “Sometimes people stick around, but if you haven’t made it by your fourth year, there’s probably an issue,” says one associate. Vice presidents make senior VP in two to four years. Lehman’s promotion policy for those on the sales and trading side is much looser. One insider reports that promotions for VP can happen within two years. 38
© 2001 Vault Inc.
Lehman Brothers On the Job
Training Programs Analysts Investment Banking analysts begin with a five-week training program that serves as an introduction to the firm and includes classroom instruction in accounting, computers and valuation techniques. Sales, trading and research analysts in equity or fixed income also begin with a five-week training program covering such exciting topics as financial statement analysis, bond math and computer training. “It’s a nine to five-type deal, maybe eight to five,” reports one recent analyst hire. The two-year programs in equities and fixed income are dubbed the START program. “They bring in outside professionals, as well as have insiders teach classes.” “Once a week we’d go out for dinner, or go out to a bar, or go to functions to get to know the different groups, [and] to meet people at the firm. Public finance analysts begin with an intensive four-week training program, following which the analysts are assigned to specific teams. Associates All associates start in a “One Firm” training program that provides an introduction to Lehman Brothers’ clients, products and services. Associates receive classroom training during their first two months to enable them to improve their skills in finance and accounting and develop analytical tools. “It starts off with this outward bound thing, a two-day camp near Boston,” says one associate. “It’s a lot of fun, and it’s also a good way to get to know the associates. You don’t get to know everybody, but you get to know a number of classmates.” After the two-day leadership-building and schmoozing period, associates have about a month and a half of classroom training. “I think we had six to eight weeks of sort of classroom-style training,” remembers one insider. “[It involved] research, investment banking, sales & trading — we all learned basically the same stuff. There were some sessions that we broke up into sessions for our group.” Says one capital markets insider: “It’s pretty intense, it’s almost like being back in business school. You do case studies, which could be across disciplines. We could do ones that are more banking-like, or ones that are more sales — and trading-like. But you definitely work normal hours.”
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Lehman Brothers On the Job
Ongoing training Many associates express discontent over the lack of ongoing training at the firm. “Early on, we were trained for two months before being placed on a desk,” says one associate trader. “Once placed, there was nothing.” Says another associate about the firm’s HR department: “They drop you like a hot potato upon placement and don’t keep you up on developments in the program.” Says an associate in sales:”Once the training and rotation period is over, associates are ‘on their own.’ Career management is non-existent. Once an associate joins a desk, the ‘program’ forgets about him.” Read between the lines for feedback For all junior employees, Lehman has an annual review process, delivered orally and sometimes in writing. For trainees in their first year, however, the firm provides a written mid-year review. “There’s 50 or 60 categories that you’re graded on: teamwork, communication, client skills, analytic skills, the whole range,” explains one associate. “The way that the review forms are filled out, there are five ranking categories. So you fall into either the top 10 percent, above peers, with peers, below peers, or horrible. People really only use the first three tiers, sometimes someone will get a four if there’s an issue. If you’re getting all threes, that’s probably not great. You have to sort of read between the lines, because nobody likes to be the messenger of bad news, you have to kind of dig for the stuff. If you’re shrewd, the signals are there.” Lehman’s summer programs are the main avenue for full-time employment with the firm. Just as with the full-time programs, summer associates intern in capital markets (sales, trading and research) and investment banking. The firm explains that the “the summer is not designed to have the interns observe Lehman, but to have us observe them — it’s a 10-week interview.” CEO Dick Fuld does a breakfast for the summer hires, as do each of the firm’s senior officers. Assignments Following their initial training period, analysts are assigned to a group. Sales, trading and research associates move from the training program into a twomonth generalist rotation, while public finance associates, after the training program, serve as generalists during the first year and work with a variety of 40
© 2001 Vault Inc.
Lehman Brothers On the Job
municipal clients. After completing about a two-month training program, investment banking associates rotate through various industry coverage and product specialty groups. International associates and those hired for regional offices receive the same training as U.S. associates and may opt to participate in the rotation program and group assignment before working at their international or regional offices. “Most people are in investment banking groups — like industries or M&A — but lots of people do capital markets,” explains one associate. “You won’t actually trade anything, but you watch and learn. Mostly you learn how banking relates with the sales and trading and research. It’s not like you’re just sitting around doing nothing.” Here’s how one insider describes the placement program for I-banking associates, starting with the three rotations. “Generally speaking you get to rank your top seven choices, and usually of the three that you get, two will be your top three, and the other one won’t. It varies from year to year — some groups are more popular than others.” For placement after the rotations, “there’s another process, whereby you rank the groups that you want to work for. The groups all sort of put their heads together as far as how many people they need. Its a matching process.” For capital markets associates, “you’re given a list of groups that are looking for people, and you rank them, and then there’s an interview process for four to six weeks. You start off interviewing with around six or seven desks, and then by the end you’ve got two or three. During this process, you’re not actually doing any work.” How do the assignments eventually get doled out? You get hired by a desk. “Either a desk is interested in you or not — you pretty much tour the desks, and everyone starts about the same time. Most people start on specific date — when the majority of people start. So say you get hired early in the week, and someone else gets hired on Thursday, you all may be starting on Monday.” Some ability to move around the firm Regarding the ability to move among groups, one investment banking insider reports that “the firm views its younger people as resources of the firm,” says one I-banking associate. “If you go to a group and shit happens, whether it’s politics or compatibility or whatever, they’ll try to accommodate you.” That insider continues: “Two people from banking have moved to fixed income Looking for a new challenge? The Vault Finance Job Board has thousands of top jobs for all experience levels. Visit www.vault.com.
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Lehman Brothers On the Job
research, one moved to capital markets, and a couple switched groups within investment banking. It’s not the model for everyone, but if you’re not happy somewhere, and the firm likes you, they’ll try to move you somewhere.” One insider describes moving as a capital markets analyst: “It’s not uncommon to move from research to sales or trading, but it’s very uncommon to move the other way — into research.” But moving from I-banking to capital markets or vice versa is virtually unheard of. “It’s a difficult move politically, and there seems to be a quota for employees in each department and they don’t want to mess with that. Also, there’s a work ethic that different in each group. The sales ethic doesn’t blend with I-banking — it’s a shorter day, and a more social atmosphere. I-banking is very intense.” A capital markets associate reports that “as far as moving among product groups, “you can move from fixed income to equities and vice versa.” That insider advises: “The move is much easier within the first six months, after that it’s much more difficult.”
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© 2001 Vault Inc.
Lehman Brothers
Final Analysis Once again, Lehman Brothers finds itself at a crossroads of sorts. The firm was reeling in the mid-1990s but regained its footing and established itself as an investment banking titan. Lehman now finds itself in a similar situation, though not nearly as serious. The firm was struggling to find itself after the boom of the late 1990s, then suffered serious infrastructure damage in the September 2001 attacks on the World Trade Center. The attacks came at a time when some felt Lehman would make a great acquisition target. Only time will tell what road Lehman will take to return to the top. For those working there in the meantime, expect many of the usual trappings of investment banking. Long hours and a frat-like culture are common complaints. Insiders do praise the firm’s “entrepreneurial” atmosphere where junior employees are given as much responsibility as they can handle. Uppers • High-quality deals • Meritocratic culture Downers • Frat-like atmosphere in some divisions • Long hours
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Lehman Brothers
Recommended Reading You should check out Lehman’s 2000 annual report and the firm’s web site at www.lehman.com. We also recommend the following recent articles about the firm: • “Lehman Takes to Life on the Road,” Financial Times, September 20, 2001. • “Surviving Wall Street’s Blues,” The Economist, September 6, 2001. • “Richard Fuld: A Cunning Player Shows His Hand,” Financial Times, August 16, 2001. • “Lehman Plans More Perks,” The Daily Deal, April 27, 2000. • “Fidelity and Lehman in Deal on Broad Range of Services,” The New York Times, June 29, 1999. • “Once in Peril, Lehman Grabs the Spotlight,” Crain’s New York Business, July 6, 1998.
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