The Last Tycoons: The Secret History of Lazard Freres & Co
Summary
Cohan, a former Lazard banker turned writer, wrote a long institutional history of Lazard Freres based on interviews with hundreds of current and former partners and on internal documents. The book covers the firm from its nineteenth-century origins as a New Orleans dry goods business through the reigns of Andre Meyer, Felix Rohatyn and Michel David-Weill, to Bruce Wasserstein's arrival and the 2005 initial public offering.
The argument concerns a business model. Lazard sold advice, kept almost no capital at risk, employed few people relative to its fee income, and depended entirely on a handful of bankers with relationships at the top of large corporations. Cohan shows that this model generated extraordinary returns on very little equity and that it also produced permanent internal conflict, because the value sat in individuals who could leave and because a controlling family owned the profits those individuals generated. Meyer's dominance, Rohatyn's role in the New York City fiscal crisis and in the merger wave, and David-Weill's attempt to hold the partnership together are the narrative spine.
The ending is the point. Wasserstein used the departure of senior partners and the family's need for liquidity to force an IPO that converted the partnership into a public company and diluted the family's control.
Cohan's method produces gossip alongside analysis, and the book is long. Several participants disputed his characterisations. It remains the best available account of how an advisory-only investment bank actually makes money and why that structure is unstable.
Key takeaways 7
- An advisory business with no balance sheet can earn extraordinary returns on capital because it employs almost none.
- The value of an advisory firm sits in a small number of individual relationships, which makes the firm permanently vulnerable to departures.
- Family ownership of a partnership's profits creates a structural conflict with the bankers who generate them.
- Andre Meyer's method combined merger advice with principal investments made alongside clients.
- Felix Rohatyn's public role in the 1975 New York City rescue functioned as marketing for the firm's advisory practice.
- Lazard's three houses in New York, London and Paris operated as separate rivalrous businesses for most of the firm's history.
- Going public solved the family's liquidity problem and permanently ended the partnership culture that produced the firm's returns.
Who should read it
Anyone in advisory, investment banking or professional services who wants to understand the economics and the governance failures of a partnership built on individual relationships.
About William D. Cohan
Financial journalist and former investment banker at Lazard, Merrill Lynch and JPMorgan Chase.
House of Cards reconstructs the ten days in which Bear Stearns lost its funding, hour by hour and from the people in the room, and remains the closest study of how a broker-dealer run actually proceeds. Money and Power and The Last Tycoons trace how Goldman Sachs and Lazard made money over decades, including the partnership economics and internal politics that decided who got paid.
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