J. Christopher Flowers says the past six months have been as good as it gets-yet he is leaving Goldman, Sachs & Co. at the end of November.
On April 13 Mr. Flowers, the head of bank mergers at Goldman, entered investment banking nirvana when two of his firm's clients, BankAmerica Corp. and First Chicago NBD Corp., announced blockbuster mergers with a combined value at the time of $90 billion. Besides generating big headlines, the deals would bring the firm about $40 million in fees.
Then on June 15, after years of debate, the partners at Goldman approved a plan designed by Mr. Flowers to sell shares of their elite investment bank to the public.
Few have played such a central role in transforming the fragmented banking business into one in which power is concentrated in a handful of multistate conglomerates. And-though Goldman decided Tuesday to postpone its initial public offering until the market improves-no one had ever succeeded in designing a plan that persuaded Goldman's partners to put their firm's vaunted culture at risk in exchange for cash.
But despite having accomplished so much by the age of 40, Mr. Flowers is leaving.
Ultimately, say people close to him, this powerful investment banker was unable to parlay his clout into what he really wanted: a hand in running Goldman Sachs.
Mr. Flowers' impending departure stems from "a power play he initiated and lost," said a banker familiar with the situation.
Mr. Flowers said he will miss Goldman but is eager to move on to the next chapter in his life. "I love Goldman Sachs and think it's the greatest bank in which to work, but moving on will give me a new perspective on life," he said. "Here, you tend to get a Goldman world view."
He said he plans to switch from advising banks to investing in them. Though the IPO may not be so hot as first expected, Mr. Flowers says he will still benefit from the offering. He can count on leaving Goldman with stock that would be worth anywhere from $100 million to $150 million after the public offering, executive recruiters say.
He said he doubts he will resurface at another investment bank after his one-year noncompetition agreement expires. Such work "is something I'd only want to do here," he said.
His tenure at Goldman was remarkable not only for what he achieved but also for how fast it came. He joined Goldman as an analyst in 1979 at age 21, straight out of Harvard University, where he had gotten a degree in applied mathematics. Rather than return to school to get his MBA or law degree, as many young Wall Streeters do, he worked his way up the Goldman ladder, and before he turned 30 he had co-founded the firm's investment banking group focusing on the rapidly consolidating banking industry. He was named partner in 1988.
His accomplishments read like a laundry list of big, industry-rattling megadeals. April's blockbusters, which generated buzz even among people who can seldom distinguish stocks from bonds, merely capped a list that includes:
NationsBank Corp.'s $15.5 billion acquisition of Barnett Banks Inc. in 1998.
Boatmen's Bancshares' $9.5 billion sale to NationsBank in 1997.
Chase Manhattan Corp.'s $10 billion merger with Chemical Banking Corp. in 1996.
In all, Mr. Flowers and his group have advised on $394 billion worth of deals since 1994, including $132 billion worth this year alone, according to Securities Data Co. Merrill Lynch & Co. is a distant No. 2, with $271 billion worth of banking deals.
These deals brought $224 million of disclosed fees to Goldman. But the fee tally probably underestimates Mr. Flowers' value to Goldman because it doesn't show how much he and the company collected for deals that didn't happen-as when his group advised Mellon Bank Corp. this year in fending off an unsolicited bid from Bank of New York Co.
Mr. Flowers estimates that his group has contributed 25% of Goldman's investment banking revenues so far this year. The Goldman IPO prospectus said net investment banking revenues through the first half of 1998 totaled $1.59 billion.
Though his clout is second to none in the marketplace, people close to Mr. Flowers say his decision to leave Goldman stems from his failure to translate this influence into greater stature at his own firm.
Mr. Flowers deserves great credit as the one who figured out how to gain the support of people who had in the past blocked efforts to take Goldman public, a source said. But after designing the IPO, he was miffed when he wasn't promoted to the triumvirate that oversees all investment banking at the firm, the source said.
Bankers at Goldman are assigned jobs, current and former employees say, and asking for a particular post is considered as gauche as asking for membership in an invitation-only country club. And so, sources say, Mr. Flowers was out.
Mr. Flowers declined to comment on the reasons behind his departure. People who know him say Mr. Flowers likes to work fast and reach decisions without delay.
They say he has little patience for rambling presentations or long deliberations. "In 10 minutes he'll give you an answer, but he might not tell you how he got there," said a former associate. "That can be intimidating."
They also praise him for consistently demonstrating coolness under pressure. When a company is facing a difficult situation Mr. Flowers' clout and calm have reassured agitated CEOs and their boards, people who have worked with him say. For example, Mellon called him in this spring after Bank of New York made an unfriendly bid that offered Mellon stockholders a 28% premium for their shares.
"He has a crisp, scientific mind and persuades by the force of his intelligence," said H. Rodgin Cohen, a partner at the Sullivan & Cromwell law firm who has worked with Mr. Flowers many times. "It's like watching somebody use geometric theorems to complete a proof."
His combination of industry savvy and Goldman Sachs prestige has made Mr. Flowers a must-have adviser as bankers have negotiated ever-bigger deals.
Norwest Corp. executives hired him in May to advise on their negotiations with Wells Fargo & Co., even though other Goldman bankers who reported to Mr. Flowers were advising Wells, according to a regulatory filing. The unusual arrangement will bring about $37 million in fees to Goldman.
Among top commercial bankers, Mr. Flowers is spoken of with admiration, if something less than warmth. "He's a great guy, well-respected," said William P. Boardman, executive vice president and head of M&A at Banc One Corp. in a typical on-the-record comment.
His sense of humor has "manifested itself more often" in recent years, colleagues say, though he frankly admits he cares little for such social rituals as golfing with his clients. "I couldn't care less about sports, and I've never touched a golf club," he said. He prefers chess or sailing.
When asked which of his many deals stands out, he said he's proudest of his role in Goldman's decision to go public. Though the IPO has been shelved, Goldman's senior partners, such as chairman Jon S. Corzine, are said still to favor taking the firm public at some point.
The IPO envisions making shareholders of "substantially all" the firm's 11,500 employees, from limited partners to secretaries. A charitable foundation is also planned. And the 189 partners, who own 65% of the firm's $6.64 billion of equity capital, stand to get much, much richer. (Retired partners own 11.4% of Goldman; Sumitomo Bank Capital Markets has a 12.6% stake; and the Bishop's Estate of Hawaii has a 10.6% stake, according to the IPO prospectus.)
For almost any other firm, a departure of someone of Mr. Flowers' stature would be a devastating blow. For Goldman, it is likely to sting, but Mr. Flowers says he doubts there will be any lasting damage.
Christopher A. Cole and Peter S. Kraus will take over as co-heads of the financial institutions group, and longtime partners such as Milton R. Berlinski and Howard A. Silverstein will remain in the group.
This year Mr. Flowers recruited Kendrick R. Wilson 3d from Lazard Freres & Co., who brought over his own prestigious stable of clients, like First Chicago NBD.
In other words, Goldman appears in good shape to remain the investment bank of choice for merger-minded bank CEOs.
"I'm sure it will hurt," Banc One's Mr. Boardman said of Mr. Flowers' departure. "But it's not anything the firm can't get over."
