I was in my office (SW corner of Liberty and West, Trade center is northeast corner of liberty and West) for the first plane crash. I heard the crash, but thought nothing of it. It sounded like a trash dumpster hitting the ground. Fred, next door, asked if I heard the crash and then said the Trade center was on fire. We were on the third floor so I had to crouch down, twist my head and look up to see the top floors of the trade center on fire. There were a dozen small fires up and down Liberty Street, people running south to Battery Park, away from the towers. Confetti was falling out of the tower, like a ticker tape parade.
I called Nora to tell her I was fine. I was leaving for an 11:00 meeting in Midtown, so maybe I’d leave early. She turned the TV on and said a plane crashed into the north side of the Trade Center. I thought it was odd to have a plane crash into a building, but hey, it's New York. Then I thought the report was wrong since I was looking at the south side of the tower and could clearly see the hole. It didn’t occur to me I was looking at the exit wound. Logged onto www.cnn.com and confirmed a plane had crashed into the building. Over the PA, the security person said, “Use common sense and stay calm.” I told Meg, “Use common sense and stay calm.” We both were thinking panic.
Went to other offices to see if I could get a better view. The marketing guys were all gone, view not better. Support office had one person, a TV on with a picture of the trade center, but view not any better.
Went to the trading room. Almost empty, but with us getting bought out, didn’t think it was any more empty than usual.
Dain Crashes into Tucker
The rumors of Tucker’s buy-out started before I arrived in October of 1999. I had been through a buy-out at Duff & Phelps and covered US Robotics when it was purchased by 3Com. The common feature in both of those buy-outs was the renegotiation of severance agreements (change of control provisions) with senior management one to two quarters before the buyout. I had been on the lookout for the same thing at Tucker, and not seeing one, did not pay much attention to the rumors.
I still struggle to understand the rationale behind change of control agreements with senior management. Clearly, it is an award to management if the company is purchased. But the award is made irrespective of management’s ability. Is it to insulate management from the fickle stock market and allow them to make the wise strategic decisions necessary for the success of the firm? But if management needs to be insulated from market volatility, why is a major portion of their compensation tied to the stock price. Something about this dog don’t hunt.
The rumors took on another life in the summer. Fleet was buying us. Wells Fargo was buying us. Dain was buying us. The takeover was announced on August 1, 2001 for cash of $24 per share. This was lower than the price of the stock at the time, and lower than the $27 the stock was trading at since the rumors heated up in June. Not a take-over, but a take-under. The rumor was Wells Fargo had bid higher, but not all cash, and wanted more time to conduct due diligence.
On paper it looked like a good strategic fit for Dain. Dain had retail offices in the Midwest and Southwest, Tucker on the East Coast and West Coast. There would be overlap for back-office functions and capital markets. Since I was a part of the capital markets group, my situation was tenuous.
The people in the capital markets group were told a number of things. Number one, Dain would interview everyone in research, sales and trading and determine if they wanted to retain certain people. Number two, in order to receive your bonus, you had to stay until the merger closed, which was expected sometime in September. Everyone had to decide on their own the likelihood of being retained by Dain. But even if the likelihood were small, staying until the end made sense since bonuses in our industry can be two to three times base salary. Even though the year had not been great, there was a strong economic incentive to stay.
One rumor we heard was the head of capital markets was negotiating with Wells Fargo, and/or others to extract the capital markets group out of Tucker. The benefit for Dain would be the avoidance of severance costs. The benefit for the capital markets personnel was gainful employment. In theory, I could have looked aggressively for a job. But I wanted my bonus and the possibility existed of staying with an extracted capital markets group.
There is a cynical interpretation of why we were told to remain until bonuses were paid. If the managers of the capital markets group were successful in finding a buyer for our division, the value would be much greater for a relatively cohesive group of people. The value would be lower if people started scattering. This is win/win for management. If they find a buyer, they keep running the show. If they don’t find a buyer, the get there severance packages. It’s win/lose for the workers. If management finds a buyer, the next day is the same as yesterday. If they don’t find a buyer, we try to find another job.
The advice from above was, “Remain calm and use common sense.”
Body Parts in the Street