Too Big to Fail [141]
From his days as a merger banker focusing on financial services, he knew that if Lehman was on the auction block, Bank of America would be the likely buyer. But if Lehman was sold to Bank of America, the implications for his own firm, Merrill Lynch, would be enormous. He had long believed that Bank of America was the natural buyer for Merrill; at a Merrill board meeting just a month earlier, Bank of America had been listed in a presentation as just one of a handful of compatible merger partners.
Fleming began trying to figure out whom he knew who might be working on a deal with Bank of America. Ed Herlihy of Wachtell, a longtime friend and one of the legal deans of banking M&A, immediately came to mind. Herlihy had worked on nearly every deal Bank of America had orchestrated over the past decade.
“This is getting ugly,” Fleming told Herlihy when he reached him on his cell. “How are my friends in Charlotte?”
Herlihy could see where this conversation was heading and took steps to deflect it immediately. “Let’s not go there, Greg,” he replied.
“Just tell me. If you’re thinking about Lehman, you have to tell me. We could be interested in talking at some point. You and I both know that would be a much better deal.”
Herlihy, clearly uncomfortable, said, “We’ve been down this road before. We’re not going to do anything unless we’re invited in. If you are serious, now would be a good time to get moving on that.”
That was all the confirmation Fleming needed to be convinced that Bank of America was indeed bidding for Lehman.
Fleming had one more call to make before his first meeting that morning. He wouldn’t contact John Thain just yet—Thain, he suspected, wouldn’t be interested at this point, for whenever Fleming had tried previously to discuss contingency plans to sell the bank, he had been dismissive. Instead he phoned Peter Kelly, Merrill’s deal lawyer, and recounted his conversation with Herlihy.
“Look, you have to make sure Bank of America is there for us,” Kelly instructed him after the two had discussed the ramifications. “You have to convince John.”
“That’s a high bar,” Fleming said. They both knew that he and Thain had a fundamentally antagonistic relationship.
“I know,” Kelly said, “but that’s why you get paid the big bucks.” Before hanging up, he made one last point: They might have to go over Thain’s head. “If you can’t convince John—and I know this is subversive behavior, but this is in the interest of the shareholders—you need to reach out to the board.”
The conference room on the thirty-first floor of Lehman Brothers was more crowded than usual for an earnings call, but what was typically a fairly routine affair had lately begun to be perceived as something more akin to an impeachment trial. Lehman was taking the situation seriously enough to have stocked the room with additional lawyers. Lehman technicians, meanwhile, were scrambling to ensure that the conference call and Webcast would go off without a major hitch. The firm had ordered hundreds of extra phone lines to keep up with the demand. The press release issued that morning, forecasted a third-quarter loss of $3.9 billion—the firm’s biggest ever.
Fuld strode in assuredly, as if nothing was out of the ordinary. Everyone in the room, however, knew that for years he had always let his chief financial officer handle these calls, as he had never been truly comfortable participating in them. As he took his seat at the head of the table, Fuld looked around the room with his trademark disarming glare, trying to settle in with his script and papers. He knew what the stakes were. Moments earlier he had taken a quick glance at the Bloomberg terminal to see if U.S. stock index futures might be higher on the hopes that he, Dick