A. G. Becker
Encyclopedia
A. G. Becker & Co. was an investment bank based in Chicago
, Illinois
, United States
.
Becker's history goes back to the 1880s when it was a commercial paper house. It evolved into a full line investment banking firm with offices in Chicago
, New York
, Los Angeles
, San Francisco, Boston
, London
(England
) and Geneva
(Switzerland
), among others.
Becker was a pioneer in the pension
consulting business with the creation of "Green Book" tables comparing results to benchmarks, to help identify the performance of institutional investor
s.
. Becker, who had been a junior partner under Schaffner, paid in $50,000 from a life insurance policy to start his own firm and by 1904 Becker had paid back the losses suffered by Schaffner's customers. Initially, Becker paid needy customers, particularly widows, first out of his own pocket.
Through the early part of the 20th century, Becker became one of the leading commercial paper firms in the U.S. Becker's commercial paper business had been founded on the dealing of "bankers acceptances", another form of short term finance for corporate borrowers, that was popular in the Chicago markets. At one point in the development of the commercial paper market in the United States, two banks were the dominant commercial paper dealers: A G Becker (concentrating its business in the MidWest and West and in the commodity markets) and Goldman Sachs (concentrating more on the East Coast and in the various financial markets of New York).
The firm slowly branched out into a stock and bond brokerage. In 1911, the firm completed its first underwriting for Hart Schaffner & Marx. Thereafter, the firm raised debt for U.S. Gypsum and later issued preferred stock for Hupp Motor Works.
By 1919, the firm had opened offices along the west coast in San Francisco, Los Angeles
, Portland
and Seattle as well as in New York City
and St. Louis. Also in 1919, Becker arranged a $50 million of notes for Sears, Roebuck & Co.. Julius Rosenwald
, part-owner of Sears, had tapped his friend Becker to lead the offering.
s and 60% owned by the existing shareholders of Becker, a combination of employees and management. In 1982, the two European firms increased their stake from 40% to just over 50%, after make a joint investment of $15 million to $20 million.
The transaction, which had been championed by S.G. Warburg founder Siegmund Warburg and Becker's president Paul Judy, expanded Becker's capital base and added an international dimension to its investment banking business. At the time, the deal was considered emblematic of the globalization of finance.
The joint venture was initially successful in elevating Becker's position in investment banking
throughout the mid-1970s. However, the firm was plagued by competition between Warburg and Paribas, as well as cultural conflicts between French, English and American executives and internal management issues in the U.S. In 1978, Becker's president, Paul Judy, an architect of the joint venture was replaced by Ira Wender. Under Wender, a number of key executives who had built the firm either were forced out or left the company.
. In July 1982, the two European partners increased their stake to just over 50% taking control of the business, in exchange for an equity injection needed to stabilize the company's finances. In October 1982, S.G. Warburg founder Siegmund Warburg, who had been the primary advocate for the Warburg investment in Becker, died. Although Warburg had originally planned to buy out Paribas, after Siegmund Warburg's death, Paribas bought out Warburg's interest in the joint venture in early 1983. Following the departure of Warburg from the joint venture, the firm was renamed A.G. Becker Paribas.
Now effectively in control of the firm, Paribas, took a more visible role in managing Becker. In June 1983, Paribas' president Herve M. Pinet, became chairman and chief executive of Becker, effectively demoting the American exuctives. Even though the profitability of other firms rebounded significantly in the bull market of late 1982 and 1983, Becker continued to sustain losses.
In May 1984, Paribas bought out the 50% of the company owned by employees other shareholders taking full control of the business. However, within a few months, Paribas soured on the business after investing additional capital. Becker had lost in excess of $80 million, through the trading of government bonds, in the final months of Paribas' ownership, losing approximately $15 million each month. However, the company suffered more long-term challenges including high overhead costs and decreased revenues from its investment banking
as well as equity and fixed income businesses. In May 1984, Becker sold its securities-correspondent business, representing 500 employees or one-third of its workforce, to Pershing LLC
, which at the time was owned by Donaldson, Lufkin & Jenrette
. Then in August 1984, Paribas announced the sale of the remainder of the company, comprising its investment banking
and other securities businesses to Merrill Lynch
. Merrill Lynch acquired Becker for $100 million in stock but absorbed only a few hundred of the firm's employees. The acquisition of Becker came on the heels of the purchase of Lehman Brothers Kuhn Loeb by Shearson/American Express and rumors during the summer of 1984 had paired Becker with Paine Webber
, Morgan Stanley
as well as Nomura
.
The purchase of Becker propelled Merrill Lynch
to a leadership in the commercial paper markets and also enhanced certain of its investment banking advisory and underwriting businesses. After the acquisition of Becker, a number of executives remained with Merrill, most notably Barry S. Friedberg who would serve as head of Investment Banking in the late 1980s and early 1990s.
Chicago
Chicago is the largest city in the US state of Illinois. With nearly 2.7 million residents, it is the most populous city in the Midwestern United States and the third most populous in the US, after New York City and Los Angeles...
, Illinois
Illinois
Illinois is the fifth-most populous state of the United States of America, and is often noted for being a microcosm of the entire country. With Chicago in the northeast, small industrial cities and great agricultural productivity in central and northern Illinois, and natural resources like coal,...
, United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
.
Becker's history goes back to the 1880s when it was a commercial paper house. It evolved into a full line investment banking firm with offices in Chicago
Chicago
Chicago is the largest city in the US state of Illinois. With nearly 2.7 million residents, it is the most populous city in the Midwestern United States and the third most populous in the US, after New York City and Los Angeles...
, New York
New York
New York is a state in the Northeastern region of the United States. It is the nation's third most populous state. New York is bordered by New Jersey and Pennsylvania to the south, and by Connecticut, Massachusetts and Vermont to the east...
, Los Angeles
Los Ángeles
Los Ángeles is the capital of the province of Biobío, in the commune of the same name, in Region VIII , in the center-south of Chile. It is located between the Laja and Biobío rivers. The population is 123,445 inhabitants...
, San Francisco, Boston
Boston
Boston is the capital of and largest city in Massachusetts, and is one of the oldest cities in the United States. The largest city in New England, Boston is regarded as the unofficial "Capital of New England" for its economic and cultural impact on the entire New England region. The city proper had...
, London
London
London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...
(England
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
) and Geneva
Geneva
Geneva In the national languages of Switzerland the city is known as Genf , Ginevra and Genevra is the second-most-populous city in Switzerland and is the most populous city of Romandie, the French-speaking part of Switzerland...
(Switzerland
Switzerland
Switzerland name of one of the Swiss cantons. ; ; ; or ), in its full name the Swiss Confederation , is a federal republic consisting of 26 cantons, with Bern as the seat of the federal authorities. The country is situated in Western Europe,Or Central Europe depending on the definition....
), among others.
Becker was a pioneer in the pension
Pension
In general, a pension is an arrangement to provide people with an income when they are no longer earning a regular income from employment. Pensions should not be confused with severance pay; the former is paid in regular installments, while the latter is paid in one lump sum.The terms retirement...
consulting business with the creation of "Green Book" tables comparing results to benchmarks, to help identify the performance of institutional investor
Institutional investor
Institutional investors are organizations which pool large sums of money and invest those sums in securities, real property and other investment assets...
s.
Founding and early history
In 1893, Abraham G. Becker took control of Herbert Schaffner & Co., a commercial paper business in Chicago. The firm, which was founded by Becker's uncle had failed during the Panic of 1893Panic of 1893
The Panic of 1893 was a serious economic depression in the United States that began in 1893. Similar to the Panic of 1873, this panic was marked by the collapse of railroad overbuilding and shaky railroad financing which set off a series of bank failures...
. Becker, who had been a junior partner under Schaffner, paid in $50,000 from a life insurance policy to start his own firm and by 1904 Becker had paid back the losses suffered by Schaffner's customers. Initially, Becker paid needy customers, particularly widows, first out of his own pocket.
Through the early part of the 20th century, Becker became one of the leading commercial paper firms in the U.S. Becker's commercial paper business had been founded on the dealing of "bankers acceptances", another form of short term finance for corporate borrowers, that was popular in the Chicago markets. At one point in the development of the commercial paper market in the United States, two banks were the dominant commercial paper dealers: A G Becker (concentrating its business in the MidWest and West and in the commodity markets) and Goldman Sachs (concentrating more on the East Coast and in the various financial markets of New York).
The firm slowly branched out into a stock and bond brokerage. In 1911, the firm completed its first underwriting for Hart Schaffner & Marx. Thereafter, the firm raised debt for U.S. Gypsum and later issued preferred stock for Hupp Motor Works.
By 1919, the firm had opened offices along the west coast in San Francisco, Los Angeles
Los Ángeles
Los Ángeles is the capital of the province of Biobío, in the commune of the same name, in Region VIII , in the center-south of Chile. It is located between the Laja and Biobío rivers. The population is 123,445 inhabitants...
, Portland
Portland, Oregon
Portland is a city located in the Pacific Northwest, near the confluence of the Willamette and Columbia rivers in the U.S. state of Oregon. As of the 2010 Census, it had a population of 583,776, making it the 29th most populous city in the United States...
and Seattle as well as in New York City
New York City
New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and...
and St. Louis. Also in 1919, Becker arranged a $50 million of notes for Sears, Roebuck & Co.. Julius Rosenwald
Julius Rosenwald
Julius Rosenwald was a U.S. clothier, manufacturer, business executive, and philanthropist. He is best known as a part-owner and leader of Sears, Roebuck and Company, and for the Rosenwald Fund which donated millions to support the education of African American children in the rural South, as well...
, part-owner of Sears, had tapped his friend Becker to lead the offering.
Joint venture with S.G. Warburg and Paribas (1974-1982)
In 1974 A.G. Becker entered into a merger with Warburg Paribas, a newly formed American joint venture between London-based S.G. Warburg and Paris-based Paribas (Compagnie Financi ere de Paris et des Pays-Bas, prior to the bank's nationalization in 1982). As a result of the transaction, the firm operated under the name A.G. Becker-Warburg Paribas Becker and was 40% owned by the two European merchant bankMerchant bank
A merchant bank is a financial institution which provides capital to companies in the form of share ownership instead of loans. A merchant bank also provides advisory on corporate matters to the firms they lend to....
s and 60% owned by the existing shareholders of Becker, a combination of employees and management. In 1982, the two European firms increased their stake from 40% to just over 50%, after make a joint investment of $15 million to $20 million.
The transaction, which had been championed by S.G. Warburg founder Siegmund Warburg and Becker's president Paul Judy, expanded Becker's capital base and added an international dimension to its investment banking business. At the time, the deal was considered emblematic of the globalization of finance.
The joint venture was initially successful in elevating Becker's position in investment banking
Investment banking
An investment bank is a financial institution that assists individuals, corporations and governments in raising capital by underwriting and/or acting as the client's agent in the issuance of securities...
throughout the mid-1970s. However, the firm was plagued by competition between Warburg and Paribas, as well as cultural conflicts between French, English and American executives and internal management issues in the U.S. In 1978, Becker's president, Paul Judy, an architect of the joint venture was replaced by Ira Wender. Under Wender, a number of key executives who had built the firm either were forced out or left the company.
Becker Paribas and the sale to Merrill Lynch (1982-1984)
Becker's president Ira Wender was forced out of the firm in 1982 when the firm announced a major restatement of its financials revealing larger operating losses. He was replaced by Daniel J. Good and John G. HeimannJohn G. Heimann
John G. Heimann was Comptroller of the Currency from 1977 to 1981.John G. Heimann, an investment banker and former New York State Supervisor of Banking and Commissioner of Housing and Community Development, was appointed by President Jimmy Carter....
. In July 1982, the two European partners increased their stake to just over 50% taking control of the business, in exchange for an equity injection needed to stabilize the company's finances. In October 1982, S.G. Warburg founder Siegmund Warburg, who had been the primary advocate for the Warburg investment in Becker, died. Although Warburg had originally planned to buy out Paribas, after Siegmund Warburg's death, Paribas bought out Warburg's interest in the joint venture in early 1983. Following the departure of Warburg from the joint venture, the firm was renamed A.G. Becker Paribas.
Now effectively in control of the firm, Paribas, took a more visible role in managing Becker. In June 1983, Paribas' president Herve M. Pinet, became chairman and chief executive of Becker, effectively demoting the American exuctives. Even though the profitability of other firms rebounded significantly in the bull market of late 1982 and 1983, Becker continued to sustain losses.
In May 1984, Paribas bought out the 50% of the company owned by employees other shareholders taking full control of the business. However, within a few months, Paribas soured on the business after investing additional capital. Becker had lost in excess of $80 million, through the trading of government bonds, in the final months of Paribas' ownership, losing approximately $15 million each month. However, the company suffered more long-term challenges including high overhead costs and decreased revenues from its investment banking
Investment banking
An investment bank is a financial institution that assists individuals, corporations and governments in raising capital by underwriting and/or acting as the client's agent in the issuance of securities...
as well as equity and fixed income businesses. In May 1984, Becker sold its securities-correspondent business, representing 500 employees or one-third of its workforce, to Pershing LLC
Pershing LLC
Pershing LLC is a subsidiary of The Bank of New York Mellon, the nation's oldest continuously operating bank, and one of the world's leading providers of securities services. Pershing has nearly $1 trillion in assets under administration...
, which at the time was owned by Donaldson, Lufkin & Jenrette
Donaldson, Lufkin & Jenrette
Donaldson, Lufkin & Jenrette or DLJ is a defunct U.S. investment bank founded by William H. Donaldson, Richard Jenrette and Dan Lufkin in 1959. Its businesses included securities underwriting; sales and trading; investment and merchant banking; financial advisory services; investment research;...
. Then in August 1984, Paribas announced the sale of the remainder of the company, comprising its investment banking
Investment banking
An investment bank is a financial institution that assists individuals, corporations and governments in raising capital by underwriting and/or acting as the client's agent in the issuance of securities...
and other securities businesses to Merrill Lynch
Merrill Lynch
Merrill Lynch is the wealth management division of Bank of America. With over 15,000 financial advisors and $2.2 trillion in client assets it is the world's largest brokerage. Formerly known as Merrill Lynch & Co., Inc., prior to 2009 the firm was publicly owned and traded on the New York...
. Merrill Lynch acquired Becker for $100 million in stock but absorbed only a few hundred of the firm's employees. The acquisition of Becker came on the heels of the purchase of Lehman Brothers Kuhn Loeb by Shearson/American Express and rumors during the summer of 1984 had paired Becker with Paine Webber
Paine Webber
Paine Webber and Company was an American stock brokerage and asset management firm that was acquired by the Swiss bank UBS AG in 2000. The company was founded in 1880 in Boston, Massachusetts, by William Alfred Paine and Wallace G. Webber. Operating with two employees, they leased premises at 48...
, Morgan Stanley
Morgan Stanley
Morgan Stanley is a global financial services firm headquartered in New York City serving a diversified group of corporations, governments, financial institutions, and individuals. Morgan Stanley also operates in 36 countries around the world, with over 600 offices and a workforce of over 60,000....
as well as Nomura
Nomura
Nomura Nomura Nomura (野村 (field village), 埜村 (wilderness field) is a Japanese surname. It can refer to:-Finance:*Nomura Holdings, part of the Nomura Group (also including Nomura Securities Co.)-People:*Don Nomura (born 1957), Japanese-American baseball agent...
.
The purchase of Becker propelled Merrill Lynch
Merrill Lynch
Merrill Lynch is the wealth management division of Bank of America. With over 15,000 financial advisors and $2.2 trillion in client assets it is the world's largest brokerage. Formerly known as Merrill Lynch & Co., Inc., prior to 2009 the firm was publicly owned and traded on the New York...
to a leadership in the commercial paper markets and also enhanced certain of its investment banking advisory and underwriting businesses. After the acquisition of Becker, a number of executives remained with Merrill, most notably Barry S. Friedberg who would serve as head of Investment Banking in the late 1980s and early 1990s.
Notable alumni
A.G. Becker enjoyed a rich history of producing leading banking figures who received their early training and up to two decades of experience with Becker before emerging as leaders in their own rights at other banks and in other fields. Many younger Becker bankers, hired from 1977 through 1984, never had the opportunity to rise through the Becker ranks because of its sale to Merrill Lynch in 1984. Nonetheless they can now be counted within the senior ranks of bankers, financiers and academics in roles throughout the United States, including Becker's original home in Chicago.- Richard DriehausRichard DriehausRichard H. Driehaus is a fund manager, businessman and philanthropist. He is the founder and chairman of Driehaus Capital Management, based in Chicago, a firm which manages US$10 billion...
, founder of Driehaus Capital Management began his career in the Institutional Trading department at Becker in the late 1960s. - Richard Elden, a former analyst at Becker in the 1960s, established Grosvenor Capital ManagementGrosvenor Capital ManagementGrosvenor Capital Management is one of the largest hedge fund sponsors globally. With estimated assets under management of $22.6 billion as of December 31, 2009, Grosvenor ranked as the third largest firm, but the largest independent firm...
in 1971. GrosvenorGrosvenor Capital ManagementGrosvenor Capital Management is one of the largest hedge fund sponsors globally. With estimated assets under management of $22.6 billion as of December 31, 2009, Grosvenor ranked as the third largest firm, but the largest independent firm...
was a pioneer in the hedge fundHedge fundA hedge fund is a private pool of capital actively managed by an investment adviser. Hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. These investors can be institutions, such as pension funds, university...
industry creating the first fund of hedge funds in the United States and as of 2009 managed in excess of $22 billion. - Barry S. Friedberg, following the purchase of Becker, would go on to be head of Investment Banking at Merrill LynchMerrill LynchMerrill Lynch is the wealth management division of Bank of America. With over 15,000 financial advisors and $2.2 trillion in client assets it is the world's largest brokerage. Formerly known as Merrill Lynch & Co., Inc., prior to 2009 the firm was publicly owned and traded on the New York...
, and subsequently rose to the position of Senior Executive Vice President before retiring. - Richard GilderRichard GilderRichard Gilder, co-founder of the Gilder Lehrman Institute of American History, heads the brokerage firm Gilder, Gagnon, Howe & Co. The firm's specialty is trading leveraged stocks and shortselling. After working at the brokerage firm of A.G. Becker & Co., Gilder founded the firm now known as...
, founder of Gilder, Gagnon, Howe & Co. began his career as a broker at Becker in the 1960s. - Lewis GlucksmanLewis GlucksmanLewis L. Glucksman was a former Lehman Brothers trader and former chief executive officer and chairman of Lehman Brothers, Kuhn, Loeb Inc.-Life:...
left Becker in 1963 to help Lehman BrothersLehman BrothersLehman Brothers Holdings Inc. was a global financial services firm. Before declaring bankruptcy in 2008, Lehman was the fourth largest investment bank in the USA , doing business in investment banking, equity and fixed-income sales and trading Lehman Brothers Holdings Inc. (former NYSE ticker...
enter the commercial paper market; as Lehman's CEO he engineered the storied sale of that firm to American ExpressAmerican ExpressAmerican Express Company or AmEx, is an American multinational financial services corporation headquartered in Three World Financial Center, Manhattan, New York City, New York, United States. Founded in 1850, it is one of the 30 components of the Dow Jones Industrial Average. The company is best...
. - Daniel J. Good who became President of EF Hutton LBO, Inc. and Head of Merchant Banking of Shearson Lehman Bros.
- John G. HeimannJohn G. HeimannJohn G. Heimann was Comptroller of the Currency from 1977 to 1981.John G. Heimann, an investment banker and former New York State Supervisor of Banking and Commissioner of Housing and Community Development, was appointed by President Jimmy Carter....
, former Comptroller of the Currency from 1977 to 1981 would join Becker in July 1982. - Jack Kugler, head of sales and trading at Becker at the time of the purchase, was instrumental in Merrill LynchMerrill LynchMerrill Lynch is the wealth management division of Bank of America. With over 15,000 financial advisors and $2.2 trillion in client assets it is the world's largest brokerage. Formerly known as Merrill Lynch & Co., Inc., prior to 2009 the firm was publicly owned and traded on the New York...
's trading operation. - Jeff Peek, a leading financial institutions expert, rose through the Merrill Lynch Investment Banking department and was appointed to head the Merrill Lynch asset management businesses. He left Merrill for senior positions at Credit Suisse First BostonCredit Suisse First BostonCredit Suisse First Boston was the former name of the banking firm Credit Suisse.-History:In 1978, Credit Suisse and First Boston Corporation formed a London-based 50-50 investment banking joint venture called the Financière Crédit Suisse-First Boston...
before being named President of CIT Group. - Donald RumsfeldDonald RumsfeldDonald Henry Rumsfeld is an American politician and businessman. Rumsfeld served as the 13th Secretary of Defense from 1975 to 1977 under President Gerald Ford, and as the 21st Secretary of Defense from 2001 to 2006 under President George W. Bush. He is both the youngest and the oldest person to...
spent two years at A.G. Becker, from 1960 to 1962, before winning election to serve in the U.S. House of Representatives. - Roger Vasey joined Merrill LynchMerrill LynchMerrill Lynch is the wealth management division of Bank of America. With over 15,000 financial advisors and $2.2 trillion in client assets it is the world's largest brokerage. Formerly known as Merrill Lynch & Co., Inc., prior to 2009 the firm was publicly owned and traded on the New York...
prior to the purchase of Becker to set up its commercial paper and money market business. After the purchase of Becker, Vasey was promoted to the head of fixed income. - Stephen H. WeissStephen H. WeissStephen H. Weiss was an American investment banker, philanthropist, and former chairman of the Cornell University Board of Trustees....
, founder of Weiss, Peck & Greer began his career in investment banking at Becker from 1959 through 1970.