Episode 20: Scott Bok - Chairman of Greenhill & Co.

0:00This week, I had the honor of sitting down with none other than Scott Bach for my 20th episode. Chairman and former CEO of Greenhill. Before I talk about Scott and our episode together, I want to first thank all of you, either in front of the camera or behind the camera, for being a part of this podcast. Really appreciate it. I never thought we'd get this far. And I really appreciate all of you who aren't subscribed or already following to our Spotify and YouTube to please follow and subscribe. I'm really trying to get our viewership and listenership up. Scott is one of the most respected figures in investment banking.

0:35Over a decades-long career, Scott has helped shape some of Wall Street's most high-profile M &A deals while building Greenhill into a premier independent advisory firm rooted in trust and long-term relationships. Scott began his career as an M &A lawyer before making the leap to investment banking at Morgan Stanley in the 80s, eventually playing a central role in launching and leading Greenhill. he's also the author of the new book surviving wall street a compelling memoir that explores the history of modern finance through the remarkable highs and lows of his own career in this conversation we talk about navigating wall street building a lasting firm his most memorable deals the qualities that make a great deal maker and why it's important to learn broad skills i know i enjoy this conversation and i hope you guys all do too thank you scott for joining me Welcome to the podcast.

1:24I'm glad to be here. Thanks for having me. So I'd love to start as I do every time at your beginnings. So can you set the stage for what your childhood was like? What would eventually become your illustrious career? What was your childhood like growing up in Grand Rapids, Michigan? Well, it's a very small town. I was kind of middle class, middle of America, small town life. So if you can imagine the quintessential vision of what that means, you know, that was me. And I was not from a family with a lot of education. My father didn't graduate from high school. My mother was only 18 years old when I was born.

1:57And, uh, but you know, they, they were, they were good parents. They wanted the best for me. Um, I got one visit to New York when I was about 12 years old and decided right then and there, that's where I was going to make my career. So I saw some opportunity along the way. How do you think your somewhat humble beginning shaped your perspective and eventual ambitions? You know, I think I, you know, when you're in a place like that, like wonderful, wonderful place to grow up. I had a, you know, a great childhood, but you do have a sense that there's a great big world out there and you really want to go out and participate in it and see it and, you know, accomplish something in it.

2:33And, you know, I was always a big reader. I mean, maybe that's why I ended up writing a book that's pretty, you know, kind of the same ilk that I used to like to read, you know, books about political and business and sports heroes. And, you know, you just got the sense there's a lot out there to do. And so I, you know, had kind of a humble, hardworking background and combined it with all that reading to try to go out and do some things in this world. And for those who don't know, you recently released a book on May 6th. Tell us a little bit about it, please. Sure. It's called Surviving Wall Street, A Tale of Triumph, Tragedy and Timing.

3:06And it really goes back to the notion that in my career, just by kind of happenstance of when I graduated in the arc that I sort of lived in my Wall Street life, a Wall Street group in a very, very small place that was really hidden, certainly to people like me growing up and really to almost everybody. You know, very, very small firms and very regionalized and specialized and so on. You know, words like private equity and hedge fund didn't even exist yet as sort of a description of anything. And, you know, if you look at what happened since then, you know, now you've got, you know, the Dow Jones is up 40 times since I graduated.

3:42You've got, you know, private equity owns 30 ,000 companies. You've got trillions of dollars of M &A deals every year. So I thought the story of how that happened and also how notwithstanding all that amazing growth, you had a majority of the firms and business when I started go out of business. So that's where the word surviving comes into it. So I thought that tale of growth, but also sort of tumult was an interesting one to tell. I've read most of the book and I've found it fascinating. I haven't seen a lot of people do it in the way you have. And I honestly found it fascinating. But you started off in what was not a conventional start for many people that would eventually become an investment banker.

4:23You ended up at Penn Law. How do you think law school impacted the way you think? Because I've talked to a lot of people who've gone to law school, and they've credited a lot for the way they think. Yes, I would give a lot of credit to law school. I mean, I didn't know what I was going to end up doing. I probably figured I was going to be a lawyer for everyone I went there. But more broadly, it gives you a lot of skills. I mean, it teaches you how to write in a very precise way. It teaches you how to speech and how to debate. And, you know, in a more technical sense, it helps you to figure out how to sort of structure deals and transactions and things like that.

4:56So it really is a different kind of training than business. I mean, business is, you know, obviously very, very, you know, quantitative, very analytical. That's important, too. I mean, I was an undergrad at Wharton, so I got my share of that. But the law really opened up kind of a new world to me in terms of the use of words, which you, by the way, as an investment banker, you need when you're selling things. You're trying to get hired. You're trying to convince a board to do something. You're negotiating a deal with the other side. All those are skills that are really honed in a law school experience.

5:31So you went into the law industry, you worked for Wachell, Lipton, Rosen and Katz in the early 80s, where you faced off against activists, corporations, people like those. You described the environment as being like the nerdy Navy SEALs. What was the environment like there? And what did you take away from your time that you still carry with you today? I carry a lot, actually. It was a wonderful experience. You know, when you think of what are the Navy SEALs, the Navy SEALs are an elite, incredibly hardworking, very intense group with extraordinary esprit de corps. And that's why I kind of said this was the nerdy version of the Navy SEALs.

6:06These were really, really smart people. It was a very small firm then when my class came out of law school and joined the firm. We were only at 66 lawyers. So that's really small by even law firm standards then, let alone now. But the intensity of what we did, you know, and the camaraderie that we had and the kind of, you know, commitment that we all made. It's, you know, everybody should be so lucky to have in their experience, in their lifetime, their early career especially, an experience where you're surrounded by really smart people that make you want to be better at what you do. And, you know, we worked kind of around the clock, but, you know, but had a lot of fun as well.

6:43And so I took an awful lot away from that experience that I've used the rest of my career. So then you decided to go into investment banking. You worked at Morgan Stanley for 11 years before leaving in 97 to join Greenhill. How did the firm evolve over those 11 years? it evolved dramatically you know those were the early days when i say that investment banking almost didn't exist when i started and kind of exploded in scale in the ensuing years a big part of that was the late you know 80s and 90s these firms are going like crazy and morgan stanley had you know a few thousand people when i got there wasn't a tiny firm but it was still pretty small and pretty much u.s they had very small outposts elsewhere and the firm added i remember each year looking at the annual report but one of the statistics they'd have in the inside front cover was number of employees.

7:29It was like 1 ,000 more people every year. I mean, the firm was growing in so many new businesses, things like trading, which were very small when I started and had only begun not long before then, or going global and building huge businesses across Europe and across Asia. So it changed pretty dramatically while it was there just as the whole industry was changing. And frankly, that's part of what caused me to move on at one point, is it felt like it was almost getting a little too big for my taste. You know, I had, you know, in my mind that experience at the law firm, small elite group, you know, Morgan Stanley when I first got there was bigger, but still felt like a small elite group.

8:06And it just felt like it was getting pretty large. And so I kind of went back to my roots at a very focused, smaller firm. You describe a significant conflict at the top of Morgan Stanley during your time there between Bob Greenhill, the kind of what one would describe as the M &A kind of more old school guy, and John Mack, the more aggressive sales and trading guy. what did you see as the significance of that conflict in the wider scope of the investment banking industry? Yes, that was really, really instructive. First of all, those are two wonderful people who both had extraordinary careers.

8:39John Mack really grew up on the sales and trading side of the firm. Bob Greenhill on the investment banking side. You know, John Mack ended up burning Credit Suisse for a good while, came back and ran Morgan Stanley. Bob Greenhill founded the first M &A department on Wall Street while he was at Morgan Stanley and obviously founded our firm. So both had extraordinary careers. But, you know, the kind of the political battle, if you will, between them was really indicative of what happens on Wall Street, which is that, you know, there's kind of it's almost like a pendulum. It's like the, you know, market cycles that drive shifts and where money is made on Wall Street.

9:14And, you know, sometimes it's better to be on the sales and trading side, sometimes on the banking side, sometimes better to be at a really big firm, sometimes at a smaller firm. You know, sometimes a firm, you know, retail, so-called retail, where you're dealing with individual investors, many, many years without a favor. Now that's very much in favor. So Wall Street, and that's kind of the point of the book in many ways, is a rapidly and continually evolving place. And that not only impacts the competition between firms, it actually also impacts the competition within the firms. Because if you happen to be a leader, one of the rising stars, say, in an area that's in ascendancy, you're going to go far.

9:54If you happen to be a leader in, you know, if you're if you're a leader in trading, say, and and you end up sort of getting in seniority to a level where you should really be, you know, topping out in your career. And it happens to be 2009. You know, that's too bad for you, because 2009 is the thick of the global financial crisis. everybody was pulling back. That's not a good place to be. On the other hand, if you're from that sales and trading side and it's sort of 2002 or 2003, you've got nothing but upside for many years ahead of you. So that kind of political battle, which was never in a hostile sense, it was just kind of classic corporate politics, really was indicative of what I've seen in the industry over my whole 40-year career.

10:42And of the people I've had on the podcast, I can't say I've had many that have been in declining industries. A lot of them have caught the tailwinds of industries on the rise and thus made their success off of that. As Howard Marks, who's one of my past guests, said, there's always a role of luck to be involved. Many people can kind of forecast it out, but there's always a role of luck. You joined Greenhill in 97 with Bob Greenhill. What was it like working with him in the early days? And what have you learned from him? Yeah, Bob was kind of a larger than life character. You know, we flew his own plane and not just any plane, but a Citation 10, the fastest non-military aircraft in the world.

11:18And, you know, he, as I mentioned earlier, founded the M &A Department of Morgan Stanley. He was a big personality. You know, clients loved him. He loved nothing more than working on deals. I mean, he was just he lived in the moment, you know, on whatever the, you know, focus on whatever the deal of the day was, loved being with clients and so on. I was quite different from him. And as a matter of fact, I was warned by some of the senior people at Morgan Stanley, you know, you're so different from Bob, you shouldn't join, you know, shouldn't join his new firm. But, you know, the fact that we were different actually worked beautifully.

11:49We were very complimentary. He didn't really care about strategy. He didn't want to manage. He didn't just had no interest in those kinds of things. He was interested on, you know, whatever client he was working with that given day. and I was kind of the more you know maybe more thoughtful analytical careful you know make sure everything's kind of working the way it should be behind the scenes as well as taking care of clients and so we ended up being a you know a great partnership and you know I learned a lot of things from him I think just in terms of I mean his bias toward action was extraordinary I mean you know I make a mention in the book that he was never got to keep a to-do list that if you if he thought something needed to be done, he did it that second.

12:30You know, there wasn't like, oh, I'll get to this tomorrow. I'll get this this afternoon. I mean, he was a very, very action oriented guy. And you come away thinking, you know what, that's a very valuable thing. I mean, people can, you know, be stuck in sort of, you know, sometimes called analysis paralysis or always, you know, thinking so long term about all the things they need to do. They don't get much done. I mean, he was action oriented and I've tried to incorporate some of that into my style as well. What are the guiding principles of Greenhill that have stayed with you guys throughout building it?

13:01You know, we're focused. You know, we're not trying to do everything for clients. We're trying to be very aligned with clients, you know, on their side, never trying to sort of get them to do some transaction that may be good for us, maybe generate a big fee or something, but not necessarily in their interest. We always tried to be a place where there's a lot of positive teamwork. You know, in the early days, we used to kind of jokingly say that our motto was sort of have fun, make money. You know, it was it was it was we didn't want it to be a grind. We don't want people who maybe were great rainmakers, but they're really difficult to work with or be around.

13:35We wanted nice people who would work in teams to try to accomplish things for our clients. And and we really kept that. I think it's always been a good place to work. And I found even analysts, you know, that I mean, you know, those are the people sort of 22 to 25 right out of university. I mean, we have had generations of analysts that have passed through this place now. And, you know, when I see people who are now in their 30s, 40s, 50s, you know, they've got very, very positive feelings toward their time with the firm. They feel like they were really part of something special. And, you know, that's really meaningful to me.

14:07That sounds great. And it sounds very different in a world full of investment banks where it's a lot of grind. It's a lot of, you know, 100-hour work weeks and stuff like that. Yes. And in a world with all those big bulge bracket banks, Morgan Stanley, Goldman Sachs, J.P. Morgan, how have you been able to compete with them? Yeah, you know, I've often said to people, even when we were, you know, having some, you know, extraordinarily positive periods that, you know, it's not that any one structure or business model is kind of by definition a winner. You need to make the most of what you've got and really focus on being the best at that.

14:41I mean, the big firms, if you think about a very large firm, it's got a lot of advantages. right? It's got a lot of people. It's got a big brand name. It's got a big marketing budget. You know, it's taken people to, you know, to golf tournaments. It's entertaining people. It's advertising on TV. It's got a lot of products to sell. So it always has a reason to call on the clients. And those are all wonderful, wonderful attributes to have. But a smaller firm has a lot of different positive attributes there. You know, you're really focused on one product. You're focused on serving your clients. You're a small enough team that everybody knows each other and everybody cares about each other and works really well as a team.

15:20And so it's kind of, you know, I used the, you know, the David and Goliath metaphor a couple of times in the book. And that's really what it was like. I mean, you can be more nimble, more clever, more, you know, client focused. And, you know, it's kind of going against the, you know, almost like you're going against the big army, right? I mean, huge numbers of people, big brand, all kinds of, you know, know, advertising and things. But, you know, if you're nimble and quick and really focus on serving the very, very specific needs of a client at any given moment, you can often beat those very big firms.

15:49And certainly that's what our firm did for a lot of years. You touched a bit about culture in my last question, a bit on culture. What were some steps you took to kind of shape the culture at Green Hill and ensure it trickled down throughout the ranks? So not only you and the executives understood the culture, but also the new analysts coming in, as you mentioned, And how would you describe the culture more deeply as being different from those bulge bracket firms you just mentioned? You know, one thing we aspired to, and I think we were reasonably good at it, was I use the word non-hierarchical a lot.

16:21I mean, of course, there are people with senior jobs to get paid more and they're more important. They set the rules and they lead the teams and so on. But we tried to make it feel like a flat organization. We tried to make it feel like everybody was on a team. And maybe you're the most junior person on that team or a mid-level person on the team or somebody who's, you know, the 40 or 50-year-old managing director on that team. We tried to make it feel like everybody was, you know, kind of almost an equal when you went to the client and tried to, you know, win business and then accomplish things for that client.

16:49So, you know, we talked about that culture a lot. We tried to recruit carefully people that fit it. We tried to recruit, you know, people who had the right kind of personality. And frankly, when we ended up with people who were difficult, sharp elbowed, political is the word people sometimes use, we would part ways with those people because it just wasn't worth risking the culture of our firm. Even if it was a person who might be a rainmaker who can develop a lot of business for it, it just wasn't worth it. We really had a longer term objective to build a great firm with a great culture. And so that always took a priority for us.

17:26And during the great financial crisis, because you guys are a purely advisory firm and you don't have a giant balance sheet like a lot of those bulge brackets I just mentioned, you were kind of on the sidelines as many firms were in times of deep distress or even failed. What did you learn from that period from just observing the environment? Well, you learn a lot of things from that period. And we were actually very, I mean, we certainly were out of the line of fire. So we never had any, you know, significant risk, as you said, because we didn't have the balance sheet or assets that went down in value so much.

17:55But we were really busy in that period because there was so much opportunity. You know, we hired a lot of people away from those firms. You know, I call them sort of refugees from the big banks that were kind of fed up with the risk inherent in those big bank models. And so we were very, very busy, but did stay out of the line of fire. I mean, what that crisis taught you, though, I mean, there have been five crises in our firm's history as an independent firm. And I write about all of them in the book. That was the big one of all of them. And that was really the biggest financial crisis since the Great Depression of the 1930s, which is kind of my grandfather's time.

18:26So I certainly didn't live through that. But, you know, it teaches you, you know what, that can happen. You know, you can have a once in a century. It's like a once in a century COVID pandemic. You know, we've never had one of those since the 1910s. So you kind of have to realize that, you know, the world may seem like every day is sort of incremental change. It's not that different from the day or week or month before. I mean, things kind of evolve over time. But you can have these moments that are really a crisis. And likewise, you know, when those crises come, you can have firms that are, you know, very, very big, very, very well established, you know, great brand names.

18:59People have all kinds of respect for it. They can disappear. You know, that's what happened, you know, to Lehman Brothers, for example, in that period. And, you know, it's just a good lesson to learn that, you know, don't take anything for granted. Don't think any place is kind of impregnable or bulletproof or, you know, can withstand any kind of crisis. And just realize that, you know, Wall Street and financial markets in general are very tumultuous places that can really upend all your assumptions in a real hurry. And over your time, you've said you saw Wall Street go from a small industry to what it is today.

19:33what are the biggest kind of differences you've seen in firms that have succeeded and evolved over time and those that have not? I think they have maintained strong cultures. I mean, they're all different. I mean, it's not that everybody has the same culture, but they have strong cultures where there is a commitment to the firm. I mean, I can remember in my early days at Oregon Stanley, some of the old timers that were there, you didn't use the word I. You're supposed to use the word we. It's not what I did. It's what we did. And that was really an ethos built into the firm. And I think the more firms succeed in that, you know, it's kind of about the firm.

20:10It's about the team. It's about and also it's about the client, not necessarily about you as the advisor or the or the trader or whatever, whatever role you play in one of those places. So, you know, that that's that's probably a key thing is the culture. And then secondly, the kind of risk management. You know, there are firms, you know, many of them have been washed away over the years that got too aggressive with leverage. They were kind of too eager to sort of amp up their earnings. So they took on, you know, went into riskier businesses or took on too much leverage. And, you know, that works great in an up market.

20:45But boy, when it turns around, it can really sink you in a hurry. And there are many, many examples of that kind of throughout my 40 years, you know, are described in the course of the book. I find that idea of maintaining the culture really interesting because it's kind of an idea of instant gratification versus kind of long-term returns rather than get a rainmaker that might make you money for five years, but then something's going to break, or you could maintain the culture in over 20 years, you guys are going to succeed. And I find that interesting. You were the first kind of independent advisory firm, one of the first to, if not the first to go public.

21:22And a lot of others followed you, Evercourt, Moellis, Lazard, to name a few. What gave you the confidence to do so? And would you approach it any differently looking back? Look, that deal was a big success. So I wouldn't really do anything differently. It's a good question, though, what gave the confidence. I mean, there had not been a firm like this. We were indeed the first to go public. And it really, the notion just believe it or not popped into my head one day in the summer of 2003 and I was kind of a young managing director we're playing a very you know significant role probably early very early 40s at the time very kind of a you know still in kind of a leadership role at our firm and and I was doing some work for a client and it just struck me that I looked at some of the companies in the public markets and I thought you know our business is better known than those and our business has more growth potential.

22:12Our business has higher margins. Our business has a bigger profile, a bigger brand than some of these. And I thought, I wonder if we could go public. And so we finished out that year, made sure we had another strong year so we'd have one more good year on our track record and called up investment banks and asked them, hey, would you come listen to our story? So it's very different from a usual IPO story where everybody knows what the good company is and all the investment banks are there trying to market and win business. You should hire us for the IPO. No one ever came to us with that. I just thought we could.

22:48And what we tried to do, and this is because we were afraid it might not be possible. We were a very, very small firm, only about 100 people at the time. We tried to craft every aspect of the deal in the way that was the most investor-friendly possible. We didn't want to take any chances at all, not be too aggressive, not be too greedy. So whether it came to like our compensation policy or our stock ownership policy or, you know, a whole bunch of other policies, we really set it up to be very, very investor friendly. And after all that worrying about will people buy this stock or not, we were, I think, 16 times oversubscribed in our in our IPO.

23:22So, you know, everybody in the world wanted to buy these shares. And in fact, the stock went up, kind of quadrupled over the first 18 months in business. So it was a big success. And, you know, it's one of those choices I've made in my career that, you know, certainly wasn't an obvious one. It was a novel sort of approach. There was risk involved, but it was calculated risk and certainly it paid off in that case. over your career you've advised on collectively hundreds of billions of dollars in deals and i'd love for you to tell us what you describe as the most memorable deal you've ever made and maybe just take us through that deal because everyone loves to hear a story about uh deals war stories stuff like that yes yes um you know i was thinking i would tell you about uh when i worked done the deal that merged all of the global Visa affiliates, like Visa is on the credit card in your wallet.