HIS BOTTOM LINE IS PURE POETRY

The recent annual meeting at Berkshire Capital Corp.’s Park Avenue offices featured co-founder and president H. Bruce McEver passing out copies of an Emily Dickinson poem. Mr. McEver began reading: “We never know how high we are . . . .”

Well, that’s one way to inject spirit into a room full of men and women who talk bottom lines, not poetry lines. “I couldn’t tell you what poem he read,” confesses one Berkshire shareholder. “I heaved it out; I only saved the balance sheet data.”

The poetry may not have moved investors as much as Mr. McEver had hoped, but the investment bank’s balance sheet sure did the job. As Dickinson put it: “Our statures touch the skies.” Berkshire’s profit margins have averaged 25% annually, reports the very satisfied shareholder. And Mr. McEver boasts of a more than 30% compound annual return to investors in the closely held firm since its inception 15 years ago.

Such profits come from being one of the first investment banks to target mutual funds and other asset managers, helping to set off a fury of acquisitions throughout the industry. Berkshire, for instance, advised Massachusetts Mutual Insurance Co.’s 1990 majority purchase of what is now Oppenheimer Funds Inc. and its 1995 acquisition of mutual fund firm David L. Babson & Co.

“They were the first,” says Donald Putnam of San Francisco-based competitor Putnam Lovell & Thornton. “They began matchmaking personalities. And they have a particularly good appreciation of the small company entrepreneur.”

Last year, boutique Berkshire was the leader in asset-management and securities deals, its 13 transactions nudging aside Putnam Lovell and beating Goldman Sachs & Co., Lazard Freres & Co. LLC and Merrill Lynch & Co., reports Charlottesville, Va., tracking firm SNL Securities Inc. (SNL places Berkshire eighth in 1997 dollar value, however, with $239.8 million, vs. $2.6 billion for Putnam and $7.9 billion for No. 1 Lazard.)

targeting brokerages

Now Berkshire
is broadening its niche by targeting the securities industry, where entrepreneurial regional brokerages are being swept up by acquisitive commercial banks trying to expand their retail investment business. “The broker is a much more efficient distributor of product than the typical loan officer,” explains Mr. McEver.

Recent brokerage deals include Chicago-based Everen Capital Corp.’s acquisition of Principal Financial Securities in Dallas, Cincinnati’s Fifth Third Bancorp buying Ohio Co. of Columbus and Atlanta’s SunTrust Banks Inc. buying Equitable Securities Corp. of Nashville.

Yet such deals aren’t easy to put together, and they aren’t getting any easier for Berkshire. Competition among investment bankers is fierce — Lazard already has staked out the small brokerage territory — and Berkshire fully expects to bump heads against Goldman and Merrill.

Berkshire co-founder Bruce Cameron, a managing director, even must pick his seat carefully on the train when going home. He might accidentally sit next to Steven Niemczyk, a managing director at Lazard who travels on the same train line.

“We wave to each other as we get on the train,” Mr. Cameron jokes, “but we don’t sit too close together.”

While Mr. Cameron insists brokering deals isn’t quite the cloak and dagger operation most people associate with investment banking, Mr. McEver acknowledges the firm has gone to great lengths to keep talks quiet. One merger was negotiated in a neutral city in a conference room at an airport for corporate jets.

Mr. Cameron also knows the firm is benefiting from the stock market. “The real test,” he notes, will come when the bull market ends.

But as consolidation continues, there won’t be many smaller securities firms left, and that may pose a problem for Berkshire. The firm must then step up to a higher level and compete against bigger names that provide underwriting capabilities the smaller Berkshire can’t.

Berkshire, for instance, already has called on Benjamin Edwards II
I, chairman of A.G. Edwards in St. Louis — one of the most sought after brokerages in the industry. “I suspect if A.G. Edwards would like to sell, the first name that comes to mind isn’t likely to be Berkshire,” acknowledges Mr. Cameron.

The difference between Berkshire and Wall Street counterparts, Mr. Cameron emphasizes, is that his firm prefers to advise on sophisticated deals instead of merely putting a property on the block.

Legg Mason Inc. Chairman Raymond “Chip” Mason, who has worked with Berkshire on several deals, cites Mr. McEver and Mr. Cameron’s stubbornness on price as a major strong point. “They tend to be gentlemen and soft-spoken, but there isn’t a lot of giving in,” he says.

one client at a time

Mr. McEver, 54, and Mr. Cameron, 41, opened shop in 1982 intending to advise brokerages, but the market was slow to follow. They targeted mutual funds instead.

They’d been working for Donald B. Marron, chairman of PaineWebber Inc., which had acquired the company that employed them. In helping him evaluate small brokerages, they came to admire his leadership. “He was a master, and still is,” Mr. McEver says. “I got to see — from the top — a firm transform itself.”

But Mr. McEver, then 39, was itching to run his own business. And Mr. Cameron says that at age 25, he had little to lose when Mr. McEver asked him to join.

They suffered the classic start-up problems. Doors were slammed in their faces, and when a deal seemed in their hands somehow it often fell through when bigger priorities suddenly diverted the clients. They lost a deal helping Fleet Bank unload a small brokerage to Chemical Banking Corp., because at the last minute Chemical opted to buy Texas Commerce Bancorp instead.

“When we first started we ate sawdust,” says Mr. McEver.

Mr. Mason recalls fondly that when Berkshire opened, its two-room office was so tiny that Mr. McEver and Mr. Cameron couldn’t have more than one client in at a time. All the lawyers, executive
s and staff involved in a transaction would get stuffed in a little conference room. “The fire marshal would have loved getting into that place,” Mr. Mason jokes.

Even today, deals are harder, and more crowded, than ever. Often there’s more than two parties involved. In many cases a mutual fund or brokerage is being sold by one parent company to another, adding new layers of egos. The selling parent wants the best price, but management of the available property wants to approve the new owner.

Berkshire recently represented Maryland-based Chevy Chase Bank’s acquisition of ASB Capital Management, which was already owned by NationsBank Corp. of Charlotte, N.C. Peter Bain, a Berkshire managing director, says NationsBank recognized it wasn’t right to bog down a transaction just for price. But “it’s always a struggle, even when everybody works collegially.”

Today, Berkshire boasts 30 employees. It plans to open an office in London to exploit deal-hot Europe. And Mr. McEver, a professorial type who writes poetry himself and enjoys the pastoral solitude of his home in the Berkshires of northern Connecticut, likens himself now to a player-coach at the firm.

But in spite of criss-crossing the nation for negotiations, Mr. McEver refuses to let the job consume him. Sometimes on an airplane he might slip a company balance sheet into his briefcase, pull out a blank piece of paper, and begin to write verses.

“Everybody has some creative channel,” he says. “The saddest thing to me is I see guys who say ‘I want to write a novel or poetry,’ but never do it.”