With great fanfare and for the second time this decade, Germany's
has taken up residence on Wall Street.
Forgive the wing-tipped masses if they're not laying out the welcome mat; most rivals are too busy waiting for the trickle of banking talent leaving the combined Deutsche/BT Alex. Brown to become a flood. Rival bankers and executive headhunters are salivating at the opportunity to take the best talent out of
Deutsche Banc Alex. Brown
, the bank formed by last month's $9 billion acquisition of
"I'm hearing it's going to be several hundred people leaving in all aspects of sales, research and investment banking," says one rival investment banker whose firm has been interviewing potential Deutsche refugees.
With human capital the Street's most precious commodity, Deutsche knows Wall Street is watching carefully this time. For years, the bank was a specter looming above Wall Street, whispered as the acquirer of every investment bank that was rumored to be in play. These days, however, many on the Street expect the world's biggest bank to flop again in its U.S. expansion attempt.
"It may be a self-fulfilling prophecy for Deutsche," says Hal Schroeder, an analyst at
Keefe Bruyette & Woods
. "People are expecting it to fail and that perception of past experiences may lead it to fail." (Keefe hasn't underwritten for Deutsche or Bankers Trust.)
John Ross, chief executive of Deutsche Bank Americas, calls the doomed-to-fail rhetoric "too superficial," and points to the German bank's continuing success on the global level since the mid-1990s. "A lot of lessons have been learned, and we have built out a phenomenally successful global investment banking platform," Ross says.
While the bank won't mind cutting about 5,500 jobs out of a total 100,000 worldwide, it's trying hard to hold on to the professionals it wants.
"We know who we want to keep, and we will try to keep them, but we have a Plan B if we can't," says Ross. "Sometimes it's not economically feasible to keep some of the people you want." Deutsche has a deep bench, which will allow No. 2 players to replace top-level talent without disruption if those top seeds choose to leave the bank, he adds.
Deutsche Banc Alex. Brown suffered its first high-level departure this week when Richard Daniel, Bankers Trust's chief financial officer, resigned. Daniel had been offered a $9 million retention package, according to
The Wall Street Journal
, but he would have had much less power in the new structure. He didn't return a call seeking a comment.
Other departures may be a given, some bankers and headhunters say, because many former BT Alex. Brown employees may find themselves stuffed with cash. Since the deal closed in late May, key employees have been getting a stub bonus equal to 5/12 of the higher of their 1998 bonus or their average bonus over past three years. They also can expect to see all the shares they've received as part of their annual compensation vest immediately instead of over the typical three years.
By the Fourth of July holiday, most of this largesse will have been dispensed, and many employees will be free to search for even greener pastures and leave the
turmoil of a merging company behind.
Lessons of Geschichte
Deutsche is definitely trying to buck history -- its own and the industry's. Deutsche tried to break into Wall Street in 1996, when it brought tech banker Frank Quattrone and his crew from
Morgan Stanley Dean Witter
. Within three years, however, Deutsche reorganized its U.S. investment banking operations to give the German parent a tighter rein. Quattrone and his group quickly left.
Investment banking is littered with the bodies of similarly mangled merger attempts. Most recently, bulge-bracket aspirant
Banc of America Securities
NationsBanc Montgomery Securities
, saw talent follow former chief Thom Weisel en masse to his new firm.
Deutsche has gone to what one bank insider describes as "very generous means" to ensure the past doesn't repeat itself. The bank created a pool of between $400 million and $500 million that has been used to retain top-level employees.
However, retention pools are like triage, says Schroeder at Keefe Bruyette: "It's an attempt to stabilize, and that's all Deutsche can do."
Indeed, Deutsche Banc Alex. Brown's top investment bankers are already up for bid, says another rival banker. To make themselves more attractive to competitors, teams of bankers, ranked analysts and traders are pitching themselves as single units to prospective employers, the banker says.
The teams are centered around industry sectors, a structure that could allow rival firms to lift entire industry coverage units out of Deutsche Banc Alex. Brown. "The firm has pockets of strength in healthcare, Internet, broadcast and telecom, and that's where most of these teams are coming from," the banker explains.
So Deutsche may have to weather a hot summer, especially if key talent that the bank thought it had locked up ends up bolting the firm, rivals say.
"A lot of Wall Street firms may not want to buy another firm, but a lot of them are looking at adding some bankers in this situation," the second banker says, adding that his firm, like many others, has been interviewing some of the Deutsche Banc Alex. Brown teams.