He is arguably the most influential m&a banker working the markets today. Few have a weightier client list: AT&T’s C. Michael Armstrong, Vivendi’s Jean-Marie Messier, Hewlett-Packard’s Carly Fiorina, Edgar Bronfman Jr., for starters. And fewer still have approached the $400 billion or so in mergers he has presided over since 1998. Indeed, one could make the case that few other bankers contributed as much to the deal-driven excesses of the nineties bull market as this man has.
Yet it’s a safe bet that you have never heard of Gene Tiger Sykes. For instance, you have never seen the Goldman Sachs banker on CNBC. Nor on the cover of Fortune. Actually, not a single picture of him is to be found in any major publication – and he declined to have his photograph taken for this one. One wonders why. After all, Sykes was Armstrong’s chief adviser when he shelled out more than $100 billion in a brash attempt to cable-ize AT&T. Then, when the stock collapsed, Armstrong called on Sykes again to help with the company’s breakup.
When Edgar Bronfman Jr. decided it was time to sell off Seagram and his beloved Universal Studios to Vivendi, he, too, put in a call to Sykes. And when Fiorina decided last summer that an HP merger with Compaq was the deal she had to have to save her job, who did she call? Gene Sykes – or, as he’s known on the Street, Goldman Sykes.
While analysts Jack Grubman of Salomon Smith Barney, Morgan Stanley’s Mary Meeker, and Credit Suisse tech banker Frank Quattrone became the public face of the boom years, Sykes has been the Invisible Man of the banking profession – a ubiquitous presence in boardrooms, law-office conference rooms, and corner offices on both sides of the Atlantic, yet a mere wraith to the rest of us.
This is the reverse of the eighties-era M&A-banker prototype. Bruce Wasserstein, Felix Rohatyn, and Goldman’s own Geoffrey Boisi may have been celebrities in the eighties, but in the next decade, their grandstanding ways left them out of the game (and in the case of Boisi, most recently of JP Morgan, out of a job). The nineties would be a time of the deal-making CEO, and the smart bankers were the ones who gave their clients center stage.
It’s a neat trick if you can pull it off: Let the Armstrongs and Bronfmans bask in the glory of their epic media confections; when the backlash begins, it’s the very same client who gets his face ripped off. Then you can help the CEO sell off what he’s just bought.
For an M&A banker, it is the sweetest of spots: to be able to take up that vital space in the deal-fevered minds of your clients, plant the seed of an idea, then move on, pocketing the fees in the process.
Sykes is not your classic overbearing banker. He is in fact a suspender-free, soft-spoken man, curiously devoid of the ego and bombast common to men of his power and station. Which is why CEOs love him. Sykes offers them a blueprint – absent the Wassersteinian poses and attitudes – and gives them a nudge, then stands aside as they themselves construct their corporate fantasies. Part technician, part dream-weaver, he grasps their hunger for greatness and knows how to make it happen.
“Gene takes care of his CEOs, and they think he is God. He lets them be the star of the show,” says a rival banker. “CEOs like that. He gets their deal done. It doesn’t matter what the outcome is. You can be sure that Carly Fiorina is going to recommend Gene Sykes to other CEOs.”
There is a story, perhaps apocryphal, that M&A bankers have been telling each other for years that speaks to the complex relationship that the adviser has with his client. It goes like this. A banker pays a visit to his CEO client, who happens to be in the cable business.
“You have a bunch of these great cable systems,” the banker says, “but my advice is that you buy some more. Doing so will really round out your cable footprint in this space.” “That’s funny you should mention my cable properties,” responds the CEO. “Because I’ve been thinking that what I have lacks a critical mass. I was going to go ahead and sell them all – what do you think about that?” The banker pauses. “You know, that’s an even better idea,” he says. “Let me get to work on it.”
“That’s a little like Gene,” says an M&A banker in defense of Sykes and his craft. “Sometimes there is no way to separate the quality of the advice from the stupidity of the client.”
Here is what we know about Sykes. He is 44 years old and works out of Goldman’s Los Angeles office, while also maintaining offices in Menlo Park and New York. He went to Harvard, got his M.B.A. from Stanford in 1984, joined right up at Goldman, and made partner at the fairly young age of 34. He is a dedicated conservationist and an accomplished triathlete who has completed two Ironman races. He is known for his propensity to read SEC filings and deal sheets while plugging away on a stationary bike in the darkness of an L.A. morning.
“Gene is the ultimate machine,” says another senior banker who has worked with him. “He made partner at Goldman. Became an M&A star. Made his tens of millions when Goldman went public. Got married. Had a baby. Everything in perfect sequence.”
Gene Sykes is a relationship banker, and that is where his power lies, because his relationships are the best on the Street. The most enduring and lucrative of these has been his bond with Armstrong, which dates back to the AT&T CEO’s time at Hughes in the early nineties. When Armstrong was hired on at AT&T in late 1997, he was confronted with the scary fact that the company’s long-distance business was collapsing. He needed to reinvent the company, and to do that, he needed to do deals. One hundred fifteen billion dollars later, Armstrong had bought cable companies TCI and MediaOne, among other things, turning AT&T into the country’s largest cable company.
The hours that Sykes and Armstrong spent together are too numerous to count, according to Armstrong. At company headquarters in Basking Ridge, New Jersey, on weekends at each other’s houses in Connecticut, in hotel rooms, on the phone – talking various deal structures through, finishing each other’s sentences. Speaking their own special language of value adds, doable deliverables, and Morris Trust reverse spins.
“I consider Gene a first principal adviser,” says Armstrong. “The value of Gene is not just in doing the transactions. He helps me think through fundamental strategic changes to a business.”
And if the deals have not necessarily been beneficial to AT&T shareholders – the stock is at $13 now compared with $61 when Armstrong’s buying binge came to an end – Goldman Sachs has benefited by collecting more than $200 million in fees from AT&T since early 1998. Not that Armstrong would take any of it back. “If Gene and I didn’t do what we did, there would be no AT&T today,” he says. “When I came here, my stock was $30. Now it’s in the teens. Down 50 percent. Well, at least it’s not $1.22, which is where WorldCom trades now.”
YES Network chairman and CEO Leo Hindery also loves Sykes. Maybe that’s because Hindery, then working at TCI for John Malone, got Sykes and Armstrong to pay $46 billion for TCI in 1998, a price seen by many to have been wildly over the top. “Gene is unique. Sure, I might have smoked him a bit on TCI, but we are still pals,” says Hindery. “He can be your ally or your adversary and you have similar affections for him.”
And then there is Bronfman, who met Sykes when he was representing Philips Electronics in its sale of PolyGram music to Seagram in 1998. “I told my people at Goldman – ‘That’s the guy I want to work with on my next deal,’ ” remembers Bronfman. “He is a good negotiator and knows that both the buyer and the seller need to get the deal done.”
It’s a huge talent, and one could argue that, in light of his gold-plated franchise and the never-ending river of fees that flow to his firm, he is underpaid with his all-in compensation said to be north of $10 million a year.
Sykes doesn’t pal around with his rival bankers, nor does he leap to return their calls. “When you finally get him on the phone,” says a rival banker, “there is no schmooze – just ‘Why are you calling me?’ “
Which is fine by Sykes: He sits on top of the mountain. Why should he have a beer with an envious Morgan Stanley managing director when he could be playing golf with Armstrong?
Better than most, Sykes understands the essence of the old Wall Street bromide that the client is never right or wrong – just king. And like the very best of courtiers, Sykes knows, too, that the key to his exalted position is not so much whether what he’s whispering is right or wrong but whether the king likes what he hears.