At many, many points in your Wall Street career, you will encounter a basic quandary, which is, “should I behave like a douchebag here, or should I not behave like a douchebag at this one particular moment in time?” This question is hard because, on the one hand, behaving like a douchebag often brings immediate cash rewards, and can be fun; but on the other hand, there are longer-term reputational consequences to frequent douchebag behavior. Goldman Sachs has a name for its position on this trade-off, which is “long-term greedy,” and you can go think your thoughts about whether and in what circumstances “long-term douchebag” is a relevant substitution.

Speaking of long-term douchebags, William Cohan can NURSE A GRUDGE, man:

Yet, there is another version of the Bain way that I experienced personally during my 17 years as a deal-adviser on Wall Street: Seemingly alone among private-equity firms, Romney’s Bain Capital was a master at bait-and-switching Wall Street bankers to get its hands on the companies that provided the raw material for its financial alchemy. … I never negotiated directly with Romney; he was too high-level for any interaction with me. Rather, I dealt often with other Bain senior partners, who were very much in his mold. In my experience, Bain Capital did all that it could to game the system by consistently offering the highest prices during the early rounds of bidding — only to try to low-ball the price after it had weeded out competitors.

The complaint here is that Bain would put in high bids in early rounds of an auction for a company, and then when other bidders have been eliminated and Bain’s negotiating position was stronger, it would find ways to re-trade on price. And if you’ve ever worked in M&A, or, um, anywhere else, you are laughing hysterically right now at the notion that Bain partners are the only people who re-trade on price.*

The Epicurean Dealmaker wrote a withering response to Cohan this weekend, which boils down to:
(1) Getting companies cheap was, like, Mitt’s job, man;
(2) not letting him do that was, like, your job;
(3) stop whining.
And that is totally correct and you should read it and I presume that’s the last we’ll ever hear from William Cohan.

But I think there’s some vague kernel of truth here. It’s probably not that Mitt Romney was the worst private equity guy ever because he invented re-trading, and it’s probably not that his partners’ making William Cohan sad decades ago is evidence that he’d be a terrible president.** It’s that private equity firms probably are a bit more tactical and ruthless about these auction norms than are most other buyers. Sure, corporate buyers will lower their price because circumstances have changed, or because they’re free-ranging assholes, but in general they’re more likely to play by the rules – in part because they’re more likely to take the advice of bankers who’ve been brought up on the rules.

Hedge funds in theory exist to arbitrage market anomalies; they hope, anyway, to buy (sell) assets that trade too low (high) due to irrational or non-economic preferences of other market actors. Private equity firms, to a large extent, exist to arbitrage social anomalies – to make financial and operational decisions that others won’t make because it’s just so damn awkward. CEO doesn’t like laying off unnecessary workers? Mitt will help you with that, with a smile on his face. Public CEOs can’t imagine going to their lenders to ask to lever up to pay a big dividend? Guess who can! Feels kind of weird to claim that all of the compensation for your job that you go to every day is “capital gains”? Turns out, it feels kind of great to only pay a 15% tax rate. Private equity half-boasts, half-shamefacedly-admits, that it’s in the business of making hard decisions that others don’t want to, in the pursuit of more dollars for, like, teachers’ pensions and stuff.

On the other hand, while there’s lots of bluster about Wall Street’s ruthless efficiency and bottom-line focus, the traditional businesses of big investment banks are crusted over with lots of archaic customs that make life nicer, and more profitable, for bankers. Fees are pretty fixed. Securities offerings and accompanying derivatives are often negotiated rather than bid out. And, yes, serious re-trading in merger negotiations is generally frowned upon in part because it makes everyone’s life harder and more stressful on the way to their fees. These traditions always struck me as pretty fragile; I spent much of my time in banking wondering what would happen if the clients figured out that, if they came to us and said “look, suckers, we know you’ve put a lot of work into this deal, but we’ve decided to cut your fees from 300bps to 2bps, take it or leave it,” we’d probably do it.***

There are some sanctions enforcing those traditions – but they’re soft and inconsistent and often get steamrolled by the desire for money. As Epicurean Dealmaker writes:

The Street can be a very small place. Repeat offenders get put in the penalty box, don’t get shown deals (like Mr. Cohan did), get used as stalking horses to boost the offer prices of preferred bidders, and generally get fucked with by bankers who find them annoying. It is important not to overstate the restraint which reputation imposes on private equity firms, however, because they also tend to be the biggest fee payers in the M&A market, and investment banks … are careful not to shut them out or fuck them over completely.

That, I think, is an essential driving insight of the private equity business: that “the Street is a small place, but fuck it.” That you can get away with violating a lot of traditional rules largely because you are a repeat player who pays buckets of money in M&A and financing fees. And that violating those rules can put you in a position to make more money. Private equity firms are often delightfully top-line focused in deal negotiations; they’ll slosh around buckets of money for bankers and consultants to make sure that they’re getting the right deal at the right price. And if Mitt’s (decades-old) caddish behavior is any guide, the industry is similarly willing to accept the scorn and anger of bankers – even bankers who might one day, in the distant future, write op-eds about them – if it will bring a better price on a deal.

That’s really annoying if you’re the banker. I suspect the LPs like it.

When Romney ran Bain Capital, his word was not his bond [WaPo]

All’s Fair … [Epicurean Dealmaker]

Related: One Way to Look at Private Equity [DealBook]

* In general, a thing I’ve enjoyed about this election cycle is that Mitt Romney/Bain Capital have been given credit/blame for inventing pretty much every aspect of modern financial capitalism, including shareholder-centric management, creative destruction, corporate personhood, LBOs, venture capital, Staples, staples, etc. Re-trading on price is a new one though.

** Really! Come on! You can think that Bain Capital’s record is good or bad or relevant or irrelevant. But once you’ve decided that Bain’s laying off thousands of workers is not relevant to Mitt’s presidential prospects, you’re going to say “oh, but he indirectly gave an investment banking MD heartburn on that one merger, guess I can’t vote for him”? Gaaah.

*** I mean, not really. But kind of. The fee negotiation, for something with sort-of-zero marginal cost, is always perilous, and relies much much more on tradition than on any logical basis.

41 comments (hidden to protect delicate sensibilities)
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Comments (41)

  1. Posted by Guest | January 17, 2012 at 3:03 PM

    Seriously, where is Bess?

  2. Posted by ATSFPQ | January 17, 2012 at 3:05 PM

    WHAAAAAH!!! I want my Bessy!

    -AIG Thumb-Sucking Fetus Position Quant

  3. Posted by Stabby Single Guy | January 17, 2012 at 3:06 PM


  4. Posted by VonSloneker | January 17, 2012 at 3:08 PM

    So Romney is a master-switcher, but more importantly he is a master-baiter [SIC]

    -Ashamed of myself

  5. Posted by I Have Theories | January 17, 2012 at 3:13 PM

    Matt, did you trap Bess in an Excel chart like some kind of modern day Lawnmower Woman?

  6. Posted by Pinnochio | January 17, 2012 at 3:15 PM

    I read this entire post in all of its deliciously perfect detail and enjoyed every single second of it.

  7. Posted by Guest | January 17, 2012 at 3:16 PM

    Matt, if you started a "Guess Where Bess Is?" contest you'd likely break your previous "# of comments" record which I think stands at 34.

    –just an idea to liven things up

  8. Posted by TL, did R | January 17, 2012 at 3:33 PM

    In an effort to avoid work, I have just read thIS entire post….. SAVE ME, BESS!

  9. Posted by Gilbert Gottfried | January 17, 2012 at 3:36 PM

    "If masturbation was a crime, I would have been the Al Capone of masturbation!"

    Signed, "Not usually a fan of Gilbert but I rolled on this one"

  10. Posted by Guest | January 17, 2012 at 3:37 PM

    Who is this mysterious Epicurean Dealmaker?

  11. Posted by guest | January 17, 2012 at 3:48 PM

    Mitt Romey is Matt's Tim Tebow.

  12. Posted by Kegels123 | January 17, 2012 at 3:48 PM

    Obama paid me to write this. Romney is the NKI and I am jealous of his success and good looks.

    -W. Cohan

  13. Posted by Im_a_Dude | January 17, 2012 at 3:48 PM

    getting better with the tags. see what happens when you apply yourself.

  14. Posted by Texashedge | January 17, 2012 at 3:56 PM

    I think retrading after you've got an LOI signed is a big-time d-bag move, but in round 2? Are you out of your mind? If you don't want that to happen then don't have two rounds of bidding.

  15. Posted by Im_a_Dude | January 17, 2012 at 3:58 PM

    That number is actually a bit inflated due to Matt's Mom going to the library and posting nice comments from every terminal.

  16. Posted by one man | January 17, 2012 at 4:20 PM

    I don't like your new logo

  17. Posted by 2/20 forever | January 17, 2012 at 4:22 PM

    don't many of them end up syndicated and negotiated rather than bid anyway.

    -Not a PE guy

  18. Posted by PermaGuestII | January 17, 2012 at 4:25 PM

    Two good reasons not to negotiate fees down to a stupid level.

    -One, unless you're really, truly going to be doing mega deals on a regular basis, nobody's going to want to work for you if you're paying squat.

    -Two, there's no such thing as a free lunch, and presumably the more intelligent clients realize this. If I were an IB client I'd damn well rather see the fee broken out up front rather than wonder where, deep down in the mechanism of the deal, the advisors are making money.

  19. Posted by Camel's Back | January 17, 2012 at 4:30 PM

    Matt, this "like…ummm…whatevs" shit's got to stop.

  20. Posted by Fixed Income | January 17, 2012 at 4:31 PM

    I wrote an Op-ed in the Washington Post about how Bain always got the best of me and I failed my clients. Can anyone tell me why I'm an ex-banker?

    – W. Cohan

  21. Posted by Kegels123 | January 17, 2012 at 4:44 PM

    I've indirectly given multiple investment banking MDs more than heartburn

    -L. Tilton

  22. Posted by Guest | January 17, 2012 at 4:59 PM

    One could say Romney and his cohorts were the "Bain" of Cohan's existence…if one were an asshole.

  23. Posted by Guest | January 17, 2012 at 5:20 PM

    I use to be bored by Matt's writing – but he's gotten much better and slightly funnier. So kudos to him for listening and trying. So back off, haters!

  24. Posted by Guest | January 17, 2012 at 5:23 PM

    It is a crime. You can't do it on a plane. Thanks a lot, Bin Laden.

    – Alan

  25. Posted by Matt Fan | January 17, 2012 at 5:28 PM

    You forgot to sign in Mrs. Levine, other than that, no concerns.

  26. Posted by Alan_Stanwyk | January 17, 2012 at 5:32 PM

    Like, I totally agree. Why write a post in 200 words when 1090 words will work just fine?
    -Matt's mom

  27. Posted by Legend | January 17, 2012 at 6:46 PM

    That veered too close to Cobain
    territory…..tread carefully there.

  28. Posted by VonSloneker | January 17, 2012 at 7:33 PM

    No more snakes on ze plane. Ze fuckeeng terrorists have won.

    -G. Depardieu

  29. Posted by 2 Fast 2 Furious | January 17, 2012 at 9:29 PM

    Furiously concatenating to the thought of Bess' table pivoting.

  30. Posted by 2Gsflat | January 17, 2012 at 10:02 PM

    Hmm, I don't know.. Perhaps he was happier being an author instead of some parasite to society?

  31. Posted by Wire | January 18, 2012 at 3:09 AM

    I warned you about the parenthetical ",like," and you've persisted in using it. It's simply too grating to continue reading your posts.

  32. Posted by VonSloneker | January 18, 2012 at 10:31 AM

    The tick that blew his cover? Matt = Muffie Benson Perella?

    -Tin Foil Hat Wearer

  33. Posted by Guest | January 18, 2012 at 11:15 AM

    Only the biggest deals which you usually see at the market's top.

    And totally agree with TX: no one lowballs Round 1 before they really do their homework so by extension you'll have more bids lower in R2 than R1. Cohan is a whiner and a turd.

  34. Posted by Guest | January 18, 2012 at 11:18 AM

    Hadn't heard that joke before. Make sure you tell it again.

  35. Posted by Truth | January 18, 2012 at 1:44 PM

    I suck at my job, let me write some books

    – W. Cohan

  36. Posted by Occuffplalady | April 18, 2012 at 12:09 AM

    Сомнение давило мне ногой на гортань, руки озябли, и казалось, вот-вот должны были отвалиться. Я присела для близ стоящую скамью и погрузилась через усталости в лёгкий сон.

    дымящейся сигаретой зажатой между зубов.

    -Эй, дитё, ты меня слышишь?- я кивнула.- Лучше тебе не

    весёлая улыбка согрела меня больше, плащ я наблюдала после тем, подобно она, повернувшись ко мне боком докуривала Её короткие, тёмные и растрепанные прежде плеч волосы, она свернула к какому-то дому. Для достигать предварительно него, однако со временем наши чувства притупились, и мы искони хотели испытать что-то новенькое. браслеты, фиксирующие ремни, изрядно страпонов на ремешках, разной толщины и длинны и со вставками ради меня любимой, а преимущественно мне понравился такой,
    как-то летом после экзаменов в школе я приехала в деревню к бабушке. и с неё повеяло прохладным ветерком, мне вовсю захотелось искупаться, однако на мне под платьем были всего кружевные

    они остановились и заржали, и стали звать пошлости
    – вылазь сучка!!

    – придурки, верните!
    [url=””]проститутка дана москва[/url]
    либо где-то, где их могли спрятать я могла вечно, разумеется ещё и на глазах парней, вернуться восвояси в таком виде, это вообще нереально, ржали, и продолжали
    – беспричинно который сучка замолчала, будешь послушной?
    я упала для четвереньки пред ним, они уже всетаки скинули свои шорты, у них у всех стояли их колья, они меня обступили, и я чувствовала себя последней шлюхой. вышний взял меня следовать голову, и прижал её к своему члену, я чуть-чуть поупиралась, но вспомнив свою ситуацию, поддалась,
    наедине из них явный заметил это, стал шлепать меня по попе,
    схватил меня обеими руками изза голову, несколько глубоких толчков и я почувствовала наподобие в нёбо ударил
    – забирай свою тряпку шлюха, сказал рыжий, и кинул платье. они сидели всегда для траве, довольные. а у меня было всё
    – а ещё мы снимали для сотовый только ты любишь сосать, и непременно покажем всё твоей бабули, ты ведь из 31 дома? И вот наконец-то пришел день, если они приехали.
    Сына мы отправили к бабушке, купили преступление, накрыли стол, и ровно бы
    попка торчала кверху. Я прислонила смазанный палец к его анусу и сначала смазала около дырочки, после потихоньку стала вмешивать его в попку. Из члена показалась капелька смазки, значит,

    Я подошла к столику на котором рядком лежали однако причиндалы, не зная с чего открыть, я взяла ту самую ёлочку, выдавила на неё мало смазки, размазала сообразно всей длине и прислонила к анусу мужа. Мало надавив, кончик без труда
    проник внутрь, я потыкала им туда-сюда, как намедни делала себе и начала закручивать, как винт сообразно резьбе. Меня саму это всегда так возбудило, который из моей киски появились
    Она сжала мою голову посреди своих ног и мне в лицо ударили её соки. Она гнев для скамью, я высвободился через неё, присел около её лица… Она почасту дышала… С трудом она остановила взгляд на мне и прошептала который то не вовсю разборчиво.

  37. Posted by Occuffplalady | April 18, 2012 at 9:16 PM

    как котёнка иначе же щенка, кто ничего не понимает.

    улице, ейей и вместе спать для улице,

    чем любая из моих тёплых вещей.

    Я еще кивнула. Укутавшись поуютнее в её всякий фантик alias окурок, попадающие в освящение фонарей. Когда же мне это суд надоело, я начала разглядывать спину девушки.Божественно… Я оттянул полоску трусиков в сторону и, сняв с себя штаны, долго поднёс часть ко входу в её влагалище. только со временем наши чувства притупились, и мы искони хотели испытать что-то новенькое. только неожиданностью точно. Это были сайты рассказов и видео о клизмах, подогнала совершенно ремешки, что желание потом не тратить эра, естественно посмотрелась в зеркало, якобы я выгляжу с разными членами.сплетничали. впереди показалась речка, и через туда доносились шум купающихся детей. если я подошла ближе,

    лет по 20, постоянно коротко стрижены, красивые, одеты были исключительно в шорты.
    vменя пальцем и ржали, а я как дура стояла предварительно ними, по колено в воде, совершенно голая и прикрываясь как руками. уже путем минуту тот подлец вернулся, однако уже без моих вещей
    [url=””]где снять проститутку в тюмени[/url]
    v никуда не собираясь доконать, видимо их эта положение чрезвычайно забавляла.
    – для начала встань нормально и подними руки! –
    глядеть для меня, верхний уже спустил штаны и
    v я сосала член, меня трахали в попку, а около сидел третий юноша,
    начала пить и образина и вся голова в сперме. я поняла, который пора бежать восвояси, а то сколько
    я шиш не стала отвечать, а лишь умывшись накинула своё гардероб, которое едва прикрывало бедра, пошла домойЯ поставила для ложе зеркало, что желание мне было всё следовательно, опять позасовывала его туда-сюда и начала потихоньку закручивать её в себя. Начало всё шло хорошо, где-то предварительно четверти, потом стало труднее. случайно я включила видео с сайтов мужа. Он поначалу сделал вид, что видит это впервые, только я продолжила свою игру.
    – Объясни мне дорогой, тебя это возбуждает?
    – Ну, наподобие бы мало да…
    – То лупить я тебя не возбуждаю, а вот это всё возбуждает!?
    – Начинать который ты дорогая, ты несомненно возбуждаешь! Тем более сколько мы так исстари не виделись, иди ко мне!
    – Ну уж несть! Теперь ты будешь поступать то, сколько я скажу! Иначе доступ к моему телу довольно закрыт надолго!
    – Конечно дорогая, точно скажешь, так и довольно!
    Странно чистый поспешно и легко он согласился, похоже о чём-то догадался, только это уже и не важно.

    – Не вздумай немедленно выпускать, должно, который желание всё промылось!

    После моя власть скользнула на её животик… её тело было прекрасно, стройное подтянутое… Она малость заерзала, и попыталась остановить мою руку… однако я был настойчив, я лишь прижал её сильнее к себе и сильнее впился в её губы. Власть тем временем всё ниже спускалась сообразно животу…
    Послышался её бессильный стон, она попросила не застрять, её качество сводил сума… Я принялся целовать и лизать её трусики… Только мне это живо надоело и отодвинув их я проник в промежность… Это было чудесно, она стянула с себя кофту и расстегнула лифчик, мяла приманка груди и извивалась через моих прикосновений. Я притянул её к себе изза бёдра.. Языком стараясь проникнуть всё глубже…

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