Rothschild dynasty taps leader outside family

 LONDON — More than 200 years ago a German banker, Mayer Amschel Rothschild, sent his five sons to different European cities to guarantee the survival of the family’s banking business.

In March, his great-great-great-grandson David de Rothschild, a baron, took an equally unusual step to ensure the future of the firm that encompasses financial advisory and wealth management companies: For the first time, he passed some responsibilities of running Rothschild to someone outside the family.

Rumours were ripe for some years in the banking industry about whom Rothschild, 67, would appoint as his successor to run what is now one of the most prominent banking dynasties.

The Rothschild family is not short of younger family members, but only Rothschild’s 29-year-old son, Alexandre, is currently working at the firm. However, he is considered by himself and the family to be too young to take over from his father.

The elder Rothschild said he felt it was time to rethink the bank’s management structure, especially since he wanted to focus more on clients and less on managing the firm’s 950 bankers.

As a result, Rothschild appointed one of them, Nigel Higgins, a 27-year Rothschild veteran in London and co-head of its investment banking unit, to the chief executive position. The baron retained some control over the family empire by remaining executive chairman. It is the first time in the firm’s history that those roles have been split.

“If you’re not totally self-centred, which I hope I am not, one thinks about how to increase the stability of the firm internally and externally,” Rothschild said during a recent interview. “You come to the conclusion that it’s time to make a change. It’s just natural and healthy.”

For many in the banking industry, the appointment of Higgins did not come as a surprise. A 49-year-old from South London, he joined Rothschild in 1982 after graduating with a degree in history from Oxford University and has worked at the firm’s London office ever since.

He will be responsible for leading the firm’s legion of bankers, known for their relationship-building skills that can involve wining and dining clients at the family’s vineyards, like Chateau Lafite in the Bordeaux region.

“What they need is just someone to steer the ship in a steady way,” said Jason Kennedy, head of the recruitment firm Kennedy Associates, based in London. “David’s not retiring. He’ll give Nigel enough rope, but if he sees he’s hanging himself and the bank with it, he’ll step in.”

Just as in the 1760s, the family is still central to the firm’s culture. Rothschild made its fortune financing the Duke of Wellington’s battle against Napoleon in 1815. Since then, the firm has offered counsel to queens, emperors and governments. Last year, Rothschild advised the American government on the reorganization of the car industry.

As executive chairman, Rothschild — always impeccably dressed with a handkerchief neatly folded in his top suit pocket — is expected to continue to nourish client relationships. Higgins is responsible for coordinating the bankers across Rothschild’s 50 offices in 36 countries, and for attracting new talent.

Many who know both bankers said the split of responsibilities naturally followed from their different characters.

John Rose, chief executive of the aircraft engine maker Rolls-Royce and a client and personal friend of Higgins, said he repeatedly hired Rothschild because he appreciated Higgins’ “clear thinking,” adding, “He’s very unflappable and has the ability to cut through and see what the important issues are.”

For Higgins, becoming the first chief executive outside the family is more of an “evolution rather than a revolution,” he said during an interview.

Higgins is under no illusion: “At the end of the day the family controls the firm and sets the culture,” he said. But like any chief, he would like to put his own stamp on the business.

Rothschild has fared better than some of its larger rivals during the financial crisis by focusing on its niche of advising on takeovers, restructurings, and debt and equity sales.

Earnings fell 47 percent, to 216 million euros ($291 million) in the year that ended in March 2009, and revenue slid to 1.3 billion euros, from 1.6 billion euros. But Rothschild does not have the kind of huge assets and liabilities on its books that many of its rivals are now struggling to reduce.

Higgins said he was not interested in adding new financial products but instead wanted to focus on improving current ones. He plans to increase the business in the United States and private banking globally.

“We want to be a top player in mergers and acquisitions and restructuring advice” in the United States, he said. In March, the bank advised CF Industries Holdings on its $4.7 billion takeover of the fertilizer maker Terra Industries, both American companies.

Higgins hopes to add an additional 10 or more bankers to its 120 in North America, but he also plans to cut costs elsewhere. Rothschild’s French and British operations were run fairly separately until about seven years ago; Higgins said there were still duplicate functions in Paris and London that could be cut.

In fact, another former employee, who spoke under the condition of anonymity, said one of Higgins’ biggest challenges would be to streamline compensation levels between Paris, London and other offices, which continues to cause conflicts. Rothschild bankers are paid only in cash, instead of shares or options, and are rewarded based on attracting new clients rather than hitting revenue targets.

Some say Higgins’ promotion to chief was only temporary until Alexandre, who joined the firm in 2008 and is now helping to build its private equity business, was old enough to take over.

“You could imagine a younger Rothschild becoming chief executive in 10 years or so,” the elder Rothschild said. “It’s all a matter of what is supported by staff and the family.”

Rothschild has fared better than some of its larger rivals during the financial crisis by focusing on its niche of advising on takeovers, restructurings, and debt and equity sales

0
0

NO COMMENTS