As a young man Alan Schwartz set his sights on becoming a professional baseball player. The talented pitcher was drafted by the Cincinnati Reds, but when an elbow injury ended his career before he could report for duty, he found it hard to give up his dream. “I never went for any job interviews when I was in college because that would have been accepting that I couldn’t play baseball anymore,” he recalls. After the injury he asked his friends what to do, and they recommended Wall Street.
It turned out to be good advice. Schwartz joined Bear Stearns as a 26-year-old institutional stock salesman in 1976, and rose to become head of investment banking and later president. But thinly capitalized Bear was heavily exposed to subprime mortgages. The tottering firm tapped Schwartz to replace Jimmy Cayne as CEO in January 2008 in a last-ditch turnaround effort, but less than three months later Schwartz was forced to sell the bank to JPMorgan Chase & Co. in a federally arranged shotgun marriage that was the beginning of the end of the standalone investment bank.
He could have stayed at JPMorgan, where he worked briefly; other firms, including Goldman Sachs Group, courted him. But he was drawn to a left-field offer from Mark Walter, co-founder and CEO of investment and advisory firm Guggenheim Partners: Create a world-class investment banking franchise. “Joining a big firm could have been interesting, but it wouldn’t have provided an opportunity to build a legacy,” says Schwartz, 66. “I was more motivated to be part of building something that, long after I’m gone, young people would want to be a part of.”
Since joining Guggenheim as executive chairman in 2009, Schwartz has built a full-service investment bank in the mold of Bear Stearns and Goldman Sachs, offering equities and debt sales, trading and research, as well as mergers and acquisitions advisory and underwriting. Along the way he’s hired more than 600 people.
The expansion has paid off in M&A, where Schwartz has drawn on a roster of contacts he built up over the decades. Guggenheim ranked 13th in U.S. M&A last year, according to Dealogic, working on 23 deals worth a collective $180 billion. That’s a big leap from 27th in 2014, when it chalked up 13 transactions with a combined value of $24 billion.
Schwartz has had a hand in most of the firm’s banner deals. Over the past year he’s advised Oyster Bay, New York–based Cablevision Systems Corp. on its $17.7 billion sale to Netherlands-headquartered telecommunications player Altice, and Verizon Communications of New York on its $4.8 billion pending acquisition of Internet company Yahoo’s operating business. “His thoughtful and balanced approach provides management and our board a unique perspective that helps guide our M&A decisions,” Lowell McAdam, chairman and CEO of Verizon, says of Schwartz.
“I think in order to give the best advice, you need to understand the company, and being in the flow with investors is crucial to that,” asserts Schwartz, who set out to create a smaller and more manageable version of an old Wall Street investment bank. “Since the crisis the conventional wisdom has been that you are either a global giant or a monoline boutique,” he says. “We’re following a different path, and I think over time that has proved to be the most resilient model.”
Brooklyn-born Schwartz earned a degree in business administration from Duke University, where he played baseball on an athletic scholarship. Shortly after joining Bear in its Dallas office, he caught the eye of then–CEO Alan (Ace) Greenberg, who persuaded him to move to New York in 1979 to head the firm’s research department. Schwartz became head of investment banking in 1985, overseeing Bear’s expansion into M&A, with specialization in media and health care. A decade later he chalked up what was then the bank’s biggest deal by advising Michael Eisner on Walt Disney Co.’s $19 billion purchase of media conglomerate Capital Cities/ABC.
Schwartz has always sought to forge broad relationships with a single client, getting to know the board and the next generation of leaders. “It’s something I’ve instilled in the culture here,” he notes. “We have a number of professionals who have multiple years of experience with the same client, and that’s very deliberate.”
Growing regulatory scrutiny of big deals has pushed failed M&A to its second-highest annual level, with $682 billion worth of proposed tie-ups halted worldwide this year as of mid-September. “There is a general unease among the population that wages have stayed stagnant while corporate profits have remained high,” Schwartz says. “That gets reflected in the officials that they elect and, in turn, the type of regulators that get appointed.”
Schwartz has navigated this tough new environment with Pfizer, a client for two decades before he became the pharmaceuticals giant’s go-to banker at Guggenheim. He recently advised New York–based Pfizer on two massive M&A deals that didn’t come to fruition: its $118 billion hostile approach for U.K. drug maker AstraZeneca in 2014 and its $160 billion offer for Ireland-based Allergan last year.
Both planned takeovers were abandoned after politicians and regulators pushed back, citing concerns about job losses and corporate tax maneuvers. The deals were structured as inversions, in which acquisitive U.S. companies take on the domicile of their overseas target to reduce taxes, until a recent clampdown by the Department of the Treasury.
Despite those setbacks, Pfizer has stayed on the deal trail. In August, Schwartz served as lead adviser as the company fought off stiff competition to land San Francisco–based cancer drug developer Medivation for $14 billion; Pfizer hopes to complete the purchase by year-end.
Schwartz may no longer play baseball, but he’s a fan of the Los Angeles Dodgers, which Guggenheim Baseball Management bought for $2 billion in 2012. The energetic father of five, who also enjoys golf and skiing, is a director of several charities and nonprofits, including the Robin Hood Foundation, which combats poverty in New York, and amfAR, The Foundation for AIDS Research.
Schwartz believes M&A activity may have peaked. “There are secular factors, such as the influence of technology on all industries, that are pushing companies to do M&A,” he says. “But at the same time, there are other variables like the regulatory environment that are making M&A more difficult to execute.”
