Wall Street Insider October 19

 

Hi, folks.

Friendly neighborhood hedge-fund reporter Bradley Saacks here pinch-hitting for Olivia and Meredith.

We here at Business Insider, like many other organizations, spend a lot of time thinking, reporting, and writing about who’s next — the next CEO of a major bank, the next big unicorn founder, the next hedge-fund billionaire.

Last week, we rolled out our annual list of people rapidly shifting from “next” to “now” with our rising stars of Wall Street list, and the fun didn’t stop there. This week, we told who’s next at Apollo’s $77 billion private-equity business.

As my colleague Casey Sullivan wrote, the two Apollo veterans tasked with putting that massive pool of money to work are David Sambur and Matt Nord, a 39-year-old and a 40-year-old, respectively, who were described as some of the most “Apolloesque” dealmakers within the firm in Casey’s story. Still, while they may be trained in Leon Black’s contrarian style and have no plans to change how the firm invests, the duo told us they may need to be more transparent in communicating the firm’s PE deals and investment strategy.

Political pressure, primarily from progressive presidential candidates Elizabeth Warren and Bernie Sanders, have painted PE as an industry that is “sucking the value out of our companies,” as Warren recently tweeted.

Warren has said that PE firms take over companies, load them with debt, strip assets, and then walk away — rich from huge management fees — when they go bankrupt. She has proposed legislation that would bring a 100% tax on fees earned by private-equity firms and create laws to protect workers’ financial interests in the event of bankruptcies.

As we barrel toward the Democratic primaries and the 2020 election, further demonization of Wall Street is to be expected. The big question I have: Will any of these negative headlines around private-equity takeovers leading to massive job cuts actually change the way that deals get done? If a Democrat is elected and makes life so difficult for some of these firms, is there going to be a tipping point where the entire model needs to change?

As always, below is a selection of stories from around the newsroom that we have curated especially for you, the dedicated reader and supporter of Business Insider Prime. Please send newsletter-related compliments, tips, and complaints to me this week at bsaacks@businessinsider.com. And thanks for reading!

—Bradley


Bank of America’s CEO says that it’s saved $2 billion a year by ignoring Amazon or Microsoft and building its own cloud instead

Bank of America has bucked the Wall Street trend by building its own private cloud software rather than outsourcing to companies like Amazon, Microsoft, and Google.

The investment, including a $350 million charge in 2017, hasn’t been cheap, but it has had a striking payoff, CEO Brian Moynihan said during the company’s third-quarter earnings call.

He said the decision helped reduce the firm’s servers to 70,000 from 200,000 and its data centers to 23 from 60, and it has resulted in $2 billion in annual infrastructure savings.

READ MORE HERE »

Merrill Lynch is shifting how it handles staff who drop out of its financial adviser trainee program, and it highlights the industry’s evolving career paths

Financial advisers-in-training at Bank of America’s wealth-management arm who exit the trainee program without becoming full-fledged advisers are more commonly transitioning to different roles within the firm instead of leaving altogether, according to Andy Sieg, the head of Merrill Lynch.

That shift underscores financial advisers’ evolving career paths. Some recruiters and experts describe an increasingly difficult environment for wealth advisers across the industry as the business of wealth management has become more competitive and crowded with countless digital, self-directed options.

Firms may be more “open to the idea of possibly finding something that would be a better fit” than they were in the past, one wealth-management recruiter told us.

As Business Insider first reported, Merrill Lynch hiked trainee financial advisers’ starting salaries by $10,000 earlier this year as it looks to attract new talent.

READ MORE HERE »

Goldman Sachs unloaded some of its WeWork shares before its investment bankers pitched investors on what it once considered a $60 billion IPO

Goldman Sachs sold some of its stake in WeWork even as the investment bank was pitching the coworking company for a highly lucrative IPO mandate.

The bank unloaded shares at two earlier fundraising rounds when the WeWork mega-investor SoftBank gave employees and earlier investors a chance to sell their stake, according to a person with knowledge of Goldman’s actions.

WeWork set the price of those sales. The bank assigned a “much more modest” valuation to the company than the $47 billion value set earlier this year, or the $61 billion to $96 billion range the firm’s investment bankers told the company’s top execs it might get in an IPO.

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Elite law firm Irell & Manella — where partners make more than $3 million a year — is seeing turbulence and departures after merger talks with a rival firm fell apart

Irell & Manella, an elite California law firm that’s arguing a case before the US Supreme Court, has experienced an exodus of partners after entering and exiting merger discussions in recent months, Business Insider has learned.

Since August, Irell has seen the departures of its managing partner as well as the heads of its global investigations and restructuring practices.

The situation marks a tumultuous period for one of the US’s most prestigious litigation firms, where lawyers are known for charging as much as $1,750 an hour. Its swashbuckling leader, Morgan Chu, is considered one of the most prolific trial lawyers, and firm clients include United Talent Agency, Warner Brothers, and Uber.

The revelations help explain how the firm, where partners earn more than $3 million a year, on average, is squinting to see a clear picture of its future.

READ MORE HERE »

The Kabbalah connection: Insiders say a celebrity-centered religious sect deeply influenced how Adam Neumann ran WeWork before its spectacular collapse

As Adam and Rebekah Neumann built WeWork into a $47 billion coworking giant, the couple relied on the teachings of the Kabbalah Centre, a spiritual organization whose high-pressure donation tactics have drained multiple former members’ bank accounts, sources told Business Insider.

Kabbalah Centre Rabbi Eitan Yardeni was a regular sight at WeWork offices, where former employees said he helped put together at least one deal, met with company executives, and, in at least one instance, spoke with the entire company as a “spiritual counselor.”

In conversations with Business Insider, former Kabbalah Centre members said Yardeni pressured them into making large donations to the religious sect, telling them that their spiritual health depended on it.

READ MORE HERE »

How the largest and most powerful Wall Street banks are cautiously opening their doors to the potentially $80 billion US cannabis industry

Some of the largest Wall Street banks are starting to sniff around the cannabis industry, despite THC being federally illegal.

Goldman Sachs, JPMorgan, and Credit Suisse have helped cannabis-related SPACs go public in the US and have advised existing clients on cannabis-related deals, though they’re careful to stay on the right side of US federal law.

READ MORE HERE »

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