RAINMAKERS - Bringing a Little Lazard to Lehman

Felix Rohatyn was on holiday in the Caribbean when he took the call from Lehman Brothers CEO Richard Fuld. It was early August 2006 and the 78-year-old Rohatyn, perhaps the most renowned investment banker of his generation, was contemplating his future after the two other bankers in his advisory boutique, Rohatyn Associates, had decamped for IPO-bound Evercore Partners. Retirement crossed his mind, as did joining Evercore or some other firm. Fuld sensed his opportunity and jumped on it.

"Before you make a decision," the Lehman CEO asked, "can we have a conversation?"

That they did. Over lunch on his return to New York, Rohatyn, who had spent nearly half a century at Lazard Frères & Co. before leaving to serve as president Bill Clinton's ambassador to France from 1997 to 2000, told Fuld that he would be interested in helping Lehman on a part-time basis. Evercore, according to informed sources, had hoped to hire him full-time, but Rohatyn wanted to devote attention to a host of outside pursuits as well: He's vice chairman of Carnegie Hall's board, a director of three European companies and co-chairman of a commission dedicated to improving U.S. infrastructure. Fuld agreed to give him flexibility, and Rohatyn joined as a senior adviser on August 22.

"I certainly wasn't looking for a job," says Rohatyn. "On the other hand, I am a big fan of Dick Fuld's, and having a home was a rather attractive proposition."

Since joining Lehman the septuagenarian has pitched in on several high-profile advisory mandates. He helped AT&T CEO Edward Whitacre shepherd the company's $86 billion acquisition of BellSouth Corp. through a complex antitrust review before its closing in late December. More recently, he has been acting as liaison between U.S. drugmaker Bristol-Myers Squibb Co. and its French rival Sanofi-Aventis as they informally discuss potential cooperation. (Neither he nor the companies will comment on the situation.) He's also advising Fuld on strategy and on expanding the firm, particularly overseas.

Rohatyn's new home has a familiar feel. During his days working alongside legendary former Lazard leader André Meyer in the 1960s and '70s, Rohatyn's firm and Lehman occupied a similar place on Wall Street: Though not the biggest of investment banks, they prided themselves on providing the highest-quality strategic advice to world business and government leaders. They often worked together on deals, allowing Rohatyn to get to know former managing partner Bobbie Lehman and other senior bankers.

"I kind of grew up in that reverence for Lehman," he says.

In 1994, Rohatyn helped advise American Express Co. on its spin-off of Lehman. Since then Fuld has transformed the firm from an undercapitalized bond-trading house into a diversified profit machine. With Fuld eager to burnish Lehman's reputation as a premier adviser, Rohatyn's experience, CEO relationships and global connections can only help.

Joining a 26,000-person firm that makes most of its money from capital markets activities -- not M&A advice -- wasn't an easy decision for Rohatyn. After some time at Lehman, he's convinced that quality advice can exist inside a big shop: "In a smaller place it is easier to control the quality of the product. But it doesn't mean you have to be in a small place to provide honest and unbiased advice."

And what of Lazard, which itself has changed from a partnership to a more diversified, public company under the leadership of a younger M&A star, Bruce Wasserstein? Though he's surprised that Wasserstein wrested control from Michel David-Weill, a descendant of Lazard's founding family, Rohatyn is unsentimental about the outcome. "I admire what Bruce Wasserstein has done," he says. "He may have a sort of medium-size model that is reasonably well balanced between the advisory side, the money management side and the markets side. I think he has managed very, very well."