The Rothschilds were outsiders who became quintessential insiders. Jim Lawrence is attempting something like that at the New York investment bank of the legendary family of financiers. A year ago, Lawrence, who had never been an investment banker, was appointed CEO of Rothschild North America and co-head of global investment banking for parent Rothschild. It was not, however, as if the native Minnesotan, 57, a graduate of Yale University and Harvard Businesss School, lacked all financial experience. He was at the time chief financial officer of Unilever and had held top executive jobs at Northwest Airlines, PepsiCo and General Mills. He’d also had a 16-year run as a management consultant at both Bain & Co. and his own firm, LEK Consulting.
Institutional Investor Senior Contributing Writer Charles Wallace spoke to him about his high-level career change.
You’ve got a rather unusual background for CEO of an investment bank. What added value do you bring to the job?
I certainly know something about growing professional services firms from my consulting days, though they are different from investment banks. I am not at all daunted by the challenge of going up against big competitors and offering a different proposition that would be attractive to clients.
What is Rothschild’s different value proposition?
First of all, we are independent. We are unconflicted. We don’t sell other products, we don’t lend money, we don’t trade securities, and we don’t underwrite securities. So you get independent, objective advice. We’re privately held, so we are not subject to quarterly earnings calls or any of that sort of thing. There are other firms that can say that, but there are few that can say they are global. We’ve got a thousand bankers around the world, with a substantial presence in Brazil, India and China. We are different from the boutique firms in that we have this global reach and we have the scale that comes with a thousand bankers and deep industry knowledge.
How has the shakeout in investment banking post–financial crash affected Rothschild?
If you look at the market share of fully integrated banks providing advice and if you look at the market share of advice-only banks, you see that the latter’s share has grown and the share of the former, the integrated firms, has declined. More and more clients understand that when they are dealing with an integrated bank that is not only providing them with advice but also with debt or securities underwriting or what have you, that the importance of the services other than advice is much, much greater. And they are saying, “You know, on a particular transaction we ought to have at least one voice around the table that is only interested in our welfare and is not in this for any other reason, and we want their pure advice.”
The Dodd-Frank act has forced some of your larger rivals to cut back their derivatives business and proprietary trading. Is that to your advantage?
I think so. As I try to recruit people from other banks, they tell me about the bureaucracy they have to go through, the dealing with lawyers. They say it is very, very difficult to do what they love to do, which is sit down with clients and plot out strategic moves. Instead, there is a constant round of bureaucratic obstacles. That is one attraction to joining us.
What’s behind the surge in U.S. merger activity, and what’s it mean for a deal maker like Rothschild?
The driver is animal spirits. The economy is improving; companies have got cash on their balance sheets; and while the economy is growing, it’s not growing as much as we would all like, so one avenue to growth is through M&A. Business people are feeling more confident now, and they are looking to do bigger deals. And we are getting more and more mandates. I am not going to crow about this, but in the first quarter we ranked No. 10, with $75.4 billion of deals, just shy of Lazard, at $81.6 billion. In number of deals, we did 19, which puts us at No. 9. So we are making some progress, and we certainly want to be consistently in the top ten to 15. We’d rather get into the top five to ten, but the main thing is to move in the right direction in terms of number and size of deals.
