Allen & Co: The Dealmakers

[VersaillesinNY]

Dear readers:

I decided to conduct some research into the so secretive Allen & Co. The company doesn’t offer a public website and rarely makes public statements on its activities. However, they have an impressive annualized return and run Allen & Co.'s annual conference at Sun Valley.

 

From their Manhattan offices, they handle some of the most important business transactions in the corporate world. They seem to be behind every big deal, to some, they are The Usual Suspects. The Allen saga fascinates Wall Street, some stories have been written, so let’s try to connect the dots and get inspired by the talent and wisdom of this boutique investment bank.

 

Below are some quotes and relevant links on Allen & Co and its managing directors. Feel free to share your thoughts and additional research on the firm and its partners.

 

VersaillesinNY

-----------------------------

 

Allen & Co.'s circle of competence: venture capital, underwriting, private placements and money management.

 

Quotes:

 

"Herbert Allen [Jr.] is not a conventional person and doesn't try to run a typical operation". Warren Buffett

 

“Herbert Allen [Jr.] has often described that operation as featuring “circles around circles of investing.” By that he means that when an attractive place to put money surfaces, the firm invests, its people invest, Allens personally invest, until the mind reels at sorting things out.”

Carol Loomis, Fortune magazine

 

"Deals just don't get done in Hollywood unless Allen & Co. has a hand in it." Excite quote.

 

“OVER A LONG WEEKEND, I could teach my dog to be an investment banker."

“It’s tough to listen when you are talking.”

Herbert A. Allen Jr

 

“I’m the person who told Groupon not to sell to Google.” Nancy Peretsman, Managing partner, Allen & Co.

 

"[Analysts are] fairly weak historians and very poor prognosticators. [Analysts] don't buy what they're recommending, so they immediately have a conflict of interest with their customers."

Herbert A. Allen Jr. on declining to hire security analysts

 

"My advice to a young person, especially a business school student, interested in Allen & Company is to be sure you become an interesting person. You should develop a full range of interests and not worry about a career. Instead, take courses that interest you-- statistics, philosophy and so on. Secondly, any young person who doesn't put the international world into perspective is a damn fool. Any education in today's world must incorporate some part of it outside the United States." Don Keough - Allen & Co. Chairman, to prospective Allen employees.

 

“The press isn't invited, he punts, not because reporters and camera crews might badger the 140 or so corporate chiefs and their families and 40 institutional investors representing $1 trillion, but because "we just don't have room . . . we're bursting at the seams."

Herbert A. Allen Jr. regarding the Sun Valley Conference.

 

“Where does innovation happen: Typically not in the office thinking hard on a problem. Sometimes it’s when I wake up in the middle of the night” Enrique F. Senior – Managing partner, Allen & Co.

 

"He has none of the bombast and fad-of-the-month that you run into the investment-banking world. It's a quiet self-confidence--but not a self-important style--that inspires confidence." Warren Buffett on Herbert A. Allen Jr.

 

Portofolios as of June 30, 2013:

 

Allen Holdings, Inc. largest positions: KO, BRK-A, IACI, TRIP & EXPE.

Allen Investment Management LLC largest positions: AIG, BP, DELL, APC & NE.

Allen Operations LLC largest positions: SCHW, WDAY, BRK-A, LOW & PG.

 

Allen & Co. – Founded in 1922

 

A classic Carol Loomis article: http://money.cnn.com/magazines/fortune/fortune_archive/2004/06/28/374371/

 

The secretive bank: http://venturebeat.com/2008/02/20/trends-secretive-new-york-bank-allen-co-gets-into-silicon-valley-media-tech/

 

A must watch interview: Herbert A. Allen Jr., Gaudino Dialogues Nov 2008 - 47:09 min:

 

Allen’s House of dreams: http://www1.iwon.com/home/careers/company_profile/0,15623,754,00.html

 

The Snowball - chapter 2: http://usatoday30.usatoday.com/money/books/2008-10-22-excerpt-the-snowball_N.htm

 

Tenets gets the job: http://www.upi.com/Emerging_Threats/2008/02/18/Tenet_gets_job_at_secretive_NY_bank/UPI-64181203344822/

 

Herbert A. Allen Jr. NYT Op-Ed: http://www.nytimes.com/2007/12/21/opinion/21allen.html

 

01 Jul 96 - Herbert Allen and his merry dealsters

Oct 97 - Players Club - CEOs talk media at Herb Allen's Sun Valley

http://www.bilderberg.org/sunvally.htm#Players

 

The Consigliere: http://www.kenauletta.com/theconsigliere.html

 

The Scoop: http://www.vault.com/company-profiles/commercial-banking-and-investment-banking/allen-company-llc.aspx

 

About the founders:

 

Wall Street people - True stories of today's masters and moguls by Charles D. Ellis:

http://books.google.com/books?id=dcNMZTnEz6UC&pg=PA26&lpg=PA26&dq=charles+allen+jr+investment&source=bl&ots=ZZ_3Jh_gAX&sig=tz-jo7Bf6MPCP1lTcf7r7wB5JN4&hl=en&sa=X&ei=7bYmUoHHGK7CsATrg4CgCA&ved=0CFQQ6AEwBA#v=onepage&q=charles%20allen%20jr%20investment&f=false

 

Herbert Allen Sr.: http://www.nytimes.com/1997/01/23/nyregion/herbert-allen-sr-88-an-early-specialist-in-corporate-takeovers.html

Charles Allen Jr.: http://www.nytimes.com/1994/07/17/obituaries/charles-allen-jr-91-founder-of-investment-company-is-dead.html

 

Greed & lawsuits in the family:

http://blogs.wsj.com/law/2012/09/27/judge-dismisses-lawsuit-against-investment-banking-chief-allen/

http://www.nysun.com/new-york/fraud-is-alleged-by-heir-of-shy-midas-of-wall/68833/

http://observer.com/1998/06/haunted-by-giving-up-his-baby-philips-sues-charles-allen-family/

 

Allen & Co. Sun Valley technology conference:

 

Sun Valley Daze: http://nymag.com/nymetro/movies/columns/hollywood/2905/

 

A Sun Valley insider's blog 2013-2009: http://mankabros.com/blogs/chairman/2013/07/11/herb-allens-sun-valley-conference-2013-day-3-the-drunkening/

 

Sun Valley 2013 complete guest list (Choose File/download):

https://docs.google.com/file/d/0BxWnldXZ7dl6WG1hTnlUaUlRSW8/edit?pli=1

 

Sun Valley 2012 complete guest list:

http://techcrunch.com/2012/07/13/which-moguls-are-attending-sun-valley-this-year-well-heres-the-complete-list/

 

Allen & Co. returns:

 

“In 1997, when ESPN bought CSN for $175 million, Allen & Co. realized a 600% return on its investment.  [investment period 1993-1997]” 

CNN Money article 2010

 

“In 1973 [Herbert Allen] put up $1 million of his own money and $500,000 of the firm's to buy a controlling interest in Columbia Pictures at $4 a share.

[…] But Allen turned the company around and sold Columbia to Coca-Cola in 1982, receiving Coke stock worth $72 for each of the Columbia shares that had cost him $4. Allen & Co. Inc. still holds all of its Coke, and each of those $4 Columbia shares is now worth $2,400 in Coke stock. Herbert Allen personally, and Allen & Co. Inc., have, so far, together made a cool half-billion dollars.“ Forbes article 1996

 

“Managing director Inc.'s $150 million arbitrage fund, [Paul] Gould has earned a 19% annualized return since 1979, compared with the market's 15%.” Forbes article 1996

 

“Not everything Allen does turns to gold, which has encouraged him to keep the firm small. Allen Value Partners, a $100 million fund for institutional investors, is being liquidated after earning an average of 12% annually for its seven years, a return Allen sheepishly calls mediocre.”

Forbes article 1996

 

Allen & Co. Managing directors’ compensation model:

 

- The firm pays only nominal salaries to principals.

- On every deal he or she brings in, an Allen managing director gets around 30% of the investment-banking fees they bring in after expenses are paid.

- If one partner advises another on a deal, he may share the ensuing fee.

- Allen & Co.'s principals, in short, are not just agents of the firm; they are personal participants in every deal they bring in.

 

Shelby Bonnie - Managing director since 2012

 

http://www.pehub.com/2012/09/25/silicon-valley-exec-shelby-bonnie-joins-allen-co/

 

Interview on innovation:

 

Bonnie's profile: http://www.forbes.com/profile/shelby-bonnie-1/

 

Andreas L. Lazar- Managing director since 2008

 

Lazar's profile: http://menorcatechtalk.com/about/who-is-coming-this-year/andreas-lazar/

 

Gillian Munson - Managing director since 2007

 

http://www.adexchanger.com/yield-management-tools/metamarkets/

 

LeRoy Kim - Managing director since 2006

 

The investor: http://www.businessinsider.com/apple-wants-to-buy-pinterest-rival-the-fancy-2012-8

 

LeRoy Kim's profile: http://ventureforamerica.org/team/#kim

 

Steve Greenberg - Managing director since 2002

 

The King of Sports Deal: http://money.cnn.com/2010/05/10/news/companies/greenberg_sports_deal_king.fortune/

 

Dealmakers: http://www.sportsbusinessdaily.com/Daily/Issues/2010/05/Issue-167/Sports-Industrialists/Steve-Greenberg-Becoming-One-Of-Sports-Important-Dealmakers.aspx

 

The dealmakers: http://www.sportsbusinessdaily.com/Journal/Issues/2004/03/20040322/SBJ-In-Depth/The-Dealmaker.aspx

 

Bill Bradley - Managing director since 2002

 

The book: http://www.billbradley.com/bill-bradley-bio/

 

Dollar Bill: http://www.nj.com/inside-jersey/index.ssf/people/bill_bradley_the_storyteller.html

 

Herb Allen III - President since 2002

 

Like father, like son: http://www.vanityfair.com/business/new-establishment/2011/19-herb-allen-III

 

Business as usual at the 2009 Sun Valley Conference: http://www.mtexpress.com/index2.php?ID=2005126836#.UiavPTZjum4

 

Thomas J. Khun - Managing director since 2000

 

ICM Behind the scenes: http://www.deadline.com/2006/07/icm-behind-the-scenes-of-project-beta-broder-deal-had-a-camp-allen-berkeley-connection/

 

Nancy Peretsman - Managing director since 1995

 

Smarter than Herbert's Dog: http://www.dyanmachan.com/peretsman.html

 

Behind the Post’s acquisition: http://www.salon.com/2013/08/06/don_graham_says_bezos%E2%80%99s_changes_will_succeed_at_post_interview_newscred/

 

This Tight-Lipped Banker Opened Up:

http://blogs.wsj.com/deals/2012/01/18/this-tight-lipped-banker-opened-up/

 

Peretsman’s profile: http://investing.businessweek.com/research/stocks/private/person.asp?personId=528981&privcapId=90371&previousCapId=30345&previousTitle=J.%20Crew%20Group,%20Inc.

 

Dara Khosrowshahi - Vice President 1995-1998

 

NYT Article on Dara & Expedia: http://www.nytimes.com/2005/08/08/technology/08expedia.html?fta=y&_r=0

 

An interview: https://www.youtube.com/watch?v=i62VhBpF4zk

 

Donald R. Keough – Chairman since 1993

 

Keough’s profile: http://www.forbes.com/profile/donald-keough/

 

The corporate Chieftain: http://media.irishcentral.com/documents/The_Corporate_Chieftain.pdf

 

A must read book: http://www.amazon.com/The-Ten-Commandments-Business-Failure/dp/product-description/1591844134

 

Don Keough on Warren Buffett – 2:06 min:

 

Don Keough Speech Classic Coke – 5:53 min: 

 

Walter T. O'Hara - Managing director since 1988

 

O'Hara's profile: http://investing.businessweek.com/research/stocks/private/person.asp?personId=41595489&privcapId=90371&previousCapId=90371&previousTitle=Allen%20&%20Company,%20Inc

 

http://www.sportsbusinessdaily.com/Journal/Issues/2008/02/20080225/This-Weeks-News/Ex-NHL-Execs-Start-Investment-Fund.aspx

 

John H. Josephson - Managing director since 1987

 

Josephson's profile: http://investing.businessweek.com/research/stocks/private/person.asp?personId=646886&privcapId=47014443&previousCapId=6857532&previousTitle=The%20Boys'%20Club%20of%20New%20York

 

M&A: http://www.themiddlemarket.com/news/htc-beats-electronics-dr-dre-222395-1.html

 

Richard L. Fields - Managing director since 1986

 

Fields'profile: http://investing.businessweek.com/research/stocks/private/person.asp?personId=540585&privcapId=7664991&previousCapId=7664991&previousTitle=Allen%20&%20Company%20LLC

 

http://www.prnewswire.com/news-releases/musicgremlin-inc-raises-venture-round-led-by-allen--company-appoints-richard-fields-to-board-of-directors-66523232.html

 

Enrique F. Senior - Managing director since 1982

 

The architect of the deal: http://www.poder360.com/article_detail.php?id_article=119&pag=1

 

The Cuban star: http://www.nxtbook.com/nxtbooks/et/poderosos2010/index.php?startid=48

 

Senior’s profile: http://investing.businessweek.com/research/stocks/private/person.asp?personId=529032&privcapId=90371

 

James Quinn - Managing director since 1982

 

Quinn’s profile: http://www.forbes.com/profile/james-quinn-2/

 

John Simon – Managing director since 1982

 

Simon’s profile: http://investing.businessweek.com/research/stocks/private/person.asp?personId=788902&privcapId=90371&previousCapId=32074&previousTitle=Neurogen%20Corp.

 

John A. Schneider Jr. - Managing director 1977-2011

 

Schneider’s profile: http://investing.businessweek.com/research/stocks/people/person.asp?personId=130407133&ticker=MNDL&previousCapId=8893836&previousTitle=Mandalay%20Sports%20Entertainment%2C%20Inc.

 

Paul A. Gould – Managing director since 1973

 

Gould’s profile: http://corporate.discovery.com/leadership/paul-gould/

 

Stanley S. Schuman – Managing director since 1970

 

Schuman’s profile: http://investing.businessweek.com/research/stocks/private/person.asp?personId=529016&privcapId=90371

 

News Corp: http://articles.philly.com/1988-08-14/business/26258420_1_triangle-publications-news-corp-cash-flow

 

Who controls News Corp?: http://www.sfbg.com/PDFs/politics/newscorpchart1009

[Carvel46]

This is great! I'm looking forward to reading the old timer stories. What are the LT returns?Thx

[VersaillesinNY]

Carvel 46:

Allen & co seems to own all or part of a hundred and fifties public and private companies. Long term returns are leaked on few deals like the Colombia Pictures/Coca-Cola. It’s interesting to note that Herbert Allen Sr entered Coke 6 years before Berkshire Hathaway.

 

Thanks to your question, I completed the article with information regarding returns and Managing directors' compensation.

 

Allen & Co returns:

 

“In 1997, when ESPN bought CSN for $175 million, Allen & Co. realized a 600% return on its investment. [investment period 1993-1997]” 

CNN Money article 2010

 

“In 1973 [Herbert Allen] put up $1 million of his own money and $500,000 of the firm's to buy a controlling interest in Columbia Pictures at $4 a share.

[…] But Allen turned the company around and sold Columbia to Coca-Cola in 1982, receiving Coke stock worth $72 for each of the Columbia shares that had cost him $4. Allen & Co. Inc. still holds all of its Coke, and each of those $4 Columbia shares is now worth $2,400 in Coke stock. Herbert Allen personally, and Allen & Co. Inc., have, so far, together made a cool half-billion dollars.“ Forbes article 1996

 

“Managing director Inc.'s $150 million arbitrage fund, [Paul] Gould has earned a 19% annualized return since 1979, compared with the market's 15%.” Forbes article 1996

 

“Not everything Allen does turns to gold, which has encouraged him to keep the firm small. Allen Value Partners, a $100 million fund for institutional investors, is being liquidated after earning an average of 12% annually for its seven years, a return Allen sheepishly calls mediocre.”

Forbes article 1996

 

Managing directors’ compensation model:

 

- The firm pays only nominal salaries to principals.

- On every deal he or she brings in, an Allen managing director gets  around 30% of the investment-banking fees they bring in after expenses are paid.

- If one partner advises another on a deal, he may share the ensuing fee.

- Allen & Co.'s principals, in short, are not just agents of the firm; they are personal participants in every deal they bring in.

[VersaillesinNY]

Allen & Co. Flourishes as a Tech Deal Maker

Facebook's WhatsApp Purchase Highlights Allen & Co.'s Rise in the Technology Sector

 

http://online.wsj.com/news/articles/SB10001424052702303636404579397112054095536

 

"Allen & Co. has long been a big player in media and entertainment deals. Facebook Inc. FB +3.04%  's $19 billion acquisition of WhatsApp Inc. highlights the boutique investment bank's rise as a Silicon Valley deal maker.

 

Allen advised Facebook on the transaction, its latest accomplishment following work on the initial public offering of Twitter Inc. TWTR -0.09%  and a big round of private financing at Dropbox Inc. Underwriting roles in IPOs from Coupons.com Inc. and Castlight Health Inc. also are on tap.

 

Last year, Allen ranked sixth among banks in proceeds raised from U.S.-listed tech and Internet IPOs, according to Dealogic. Before 2010, it had never ranked higher than 21st. On tech mergers globally, Allen ranked 16th last year, up from 53rd in 2010.[...]"

[constructive]

Allen & Co. Flourishes as a Tech Deal Maker

Facebook's WhatsApp Purchase Highlights Allen & Co.'s Rise in the Technology Sector

 

http://online.wsj.com/news/articles/SB10001424052702303636404579397112054095536

 

"Allen & Co. has long been a big player in media and entertainment deals. Facebook Inc. FB +3.04%  's $19 billion acquisition of WhatsApp Inc. highlights the boutique investment bank's rise as a Silicon Valley deal maker.

 

Allen advised Facebook on the transaction, its latest accomplishment following work on the initial public offering of Twitter Inc. TWTR -0.09%  and a big round of private financing at Dropbox Inc. Underwriting roles in IPOs from Coupons.com Inc. and Castlight Health Inc. also are on tap.

 

Last year, Allen ranked sixth among banks in proceeds raised from U.S.-listed tech and Internet IPOs, according to Dealogic. Before 2010, it had never ranked higher than 21st. On tech mergers globally, Allen ranked 16th last year, up from 53rd in 2010.[...]"

 

Considering the likelihood that WhatsApp will end up being a huge dud, you would think they would be sensitive to reputational risk. How much money is it worth to be the face of bad dealmaking in the second tech bubble?