Jack Levy: Strategic Thinking And People Skills

It was when he was getting his MBA at Stanford University in 1978 that a professor urged Jack Levy to go into investment banking. He did, with characteristic brio, becoming head of M&A at Merrill Lynch & Co. 11 years later, then moving on to the same post at Goldman, Sachs & Co. His strategic thinking and people skills — he tells corny jokes to ease tensions — set him apart.

Rarely, though, have those skills been put to the test as in the $68 billion Pfizer–Wyeth Corp. merger. Conceived in early 2008, the deal was negotiated — and renegotiated — between September 2008 and January 2009, in the midst of the market meltdown. “It was a period when deals were getting terminated, lenders were not prepared to live up to loan agreements, and private equity firms were getting sued for backing out of transactions,” notes Levy, 56. “This deal was one of the first to show the Street what a transaction could look like in a post-Lehman environment.”

In early 2008, Pfizer’s expansion-minded CEO, Jeffrey Kindler, was mulling whether to buy Wyeth or to go after a string of smaller drug companies. It was Merrill’s then–head of M&A for the Americas, Alan Hartman, who persuaded him that Wyeth was the better fit. Nevertheless, Kindler chose Levy — who had advocated the smaller deals — to act as lead adviser. (He had earlier advised Pfizer on its $84 billion acquisition of Warner-Lambert Co.) Merrill and JPMorgan Chase & Co. played supporting roles as co–lead advisers.

After preliminary talks, Pfizer launched an offer of $53 a share in cash and stock in early September, only to watch the credit market seizure following Lehman Brothers Holdings’ collapse disrupt efforts to secure $20 billion-plus in debt financing. Even with its triple-A credit rating, Pfizer could not be sure of raising such a sum.

Faced with the deal’s collapse, Levy and Goldman’s head of health care M&A, Kenneth Hitchner, helped to engineer a hard-won compromise. Wyeth agreed to let Pfizer back out of the deal if it couldn’t raise the financing, and Pfizer agreed to an unusual $4.5 billion breakup fee. Meanwhile, Goldman, Merrill and Morgan Stanley, along with co-advisers Barclays Capital and Citi, put together a $22.5 billion bridge loan. Wyeth agreed to a revised offer of $50.19 a share in January, and Pfizer, aided by a recovery in credit markets, was able to issue $13.5 billion of bonds in the U.S. in March and $10.5 billion worth in Europe in June to finance the deal. Pfizer and Wyeth paid nearly $250 million in fees, knowledgeable sources estimate, making this far and away the most lucrative deal of 2009.

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