When a bloated William Blair & Co. recalled former managing partner Edgar D. Jannotta to active management in March, it said so in a three-sentence blurb issued to the press at the unfashionable hour of 6:29 p.m.
The news, of course, did not get major play - as the publicity-shy investment bank prefers. Mr. Jannotta, Blair's 70-year-old major-domo, was given the new title of chairman and the novel challenge of divining what once came naturally to the 66-year-old LaSalle Street institution: printing money.
In late April, just weeks into the uncompleted "strategic review," Blair for the first time executed what it said were across-the-board layoffs. Yet, amid a depressed market for its bread-and-butter business - public offerings and other financings for midsize "growth-stock" companies - Blair still has excess capacity.
The question that Blair hasn't answered is whether that business will rebound anytime soon - or whether the firm's ranks, already trimmed 5%, will have to shrink further to fit a longer-term slump.
After surging nearly 50%, to 970 employees, since 1997, Blair's head count in May - post-layoff - was still 2.5% higher than the year-earlier figure, despite an overall U.S. equity underwriting market that had slowed to about half the annualized pace of early 2000.
Tough competition
The downturn has hit Blair particularly hard because the firm largely missed the late-1990s boom in technology and telecom issues, and now finds itself pressured by larger competitors better equipped to handle the complex, superscale financings that are happening.
President and CEO E. David Coolidge III - no doubt overshadowed, temporarily at least, by Mr. Jannotta's reappearance - puts the best spin on Blair's relatively narrow client and product base, declaring that "there's certainly a place" for such a "highly focused" firm.
He points out that last year's revenues were a record $357 million, while Blair's five-year return on equity was an enviable 38% compared with an industry average of 25.4%.
But that was yesterday.
Though the privately held Blair does not disclose earnings (some recently departed employees suggest that the firm essentially broke even last year after paying bonuses) it's safe to assume that returns will drop drastically this year. Goldman Sachs Group Inc., for example, achieved a 2000 ROE of 27%; this year, with the company laying off 12% of its work force, the projection is 16.7%.
"Everybody's hunkering down," says Paul Purcell, president and CEO of Milwaukee's Robert W. Baird & Co. "It's a different environment."
One characteristic that Blair touts - its independence - ironically may have been bolstered by industry conditions, as multiples have shrunk for investment banks.
