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BEAR STEARNS
BEAR STEARNS
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ISBN 1–58131–192–3
INTRODUCTION 1
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Bear Stearns at a Glance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
THE SCOOP 3
History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
League Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
ORGANIZATION 25
VAULT NEWSWIRE 29
GETTING HIRED 39
FINAL ANALYSIS 49
RECOMMENDED READING 51
Bear Stearns
Introduction
Overview
Bear Stearns & Co. is younger than many of its high-profile rivals, but the
firm’s reputation stands up to those of its competitors. Known as “Bear” to
Wall Street players, the venerable institution is one of the nation’s top
investment banking, securities trading and brokerage firms. With a gamut of
financial services available, Bear Stearns serves as financial advisor to many
of the nation’s major corporations, and its clearing operations are a top choice
of brokerage and other investment firms, including many of its own rivals.
With more than 75 continuous years of profitability under its belt, Bear
Stearns is one of Wall Street’s most influential firms and, according to
Institutional Investor magazine in April 2002, is the seventh largest securities
firm in terms of total capital.
The firm recently went through a changing of the guard. In June 2001, Alan
“Ace” Greenberg resigned as chairman after 52 years with the firm.
Greenberg earned a reputation as a cost-cutter, mainly because of his 1996
book, Memos from the Chairman, a collection of his witty memos to his staff.
Ace recommends reusing broken rubber bands (he suggest tying the ends
together) and conserving paperclips. Bear Stearns employees were even
encouraged to snitch on colleagues who weren’t as thrifty as Ace would have
liked. These extreme examples reveal a lean organization; Bear had
approximately 11,000 employees in 2001, nearly half competitor Goldman
Sachs and one-sixth that of Morgan Stanley. Don’t think Greenberg’s
departure means a new lavish culture. CEO James Cayne, who assumed the
role of chairman after Greenberg, indicated that management wouldn’t
change its ways. Whether professionals will still have to monitor paper clip
usage remains to be seen.
UPPERS
Headquarters
383 Madison Avenue • Responsibility for juniors
New York, NY 10179 • Top of the pay scale
Phone: (212) 272-2000
www.bearstearns.com DOWNERS
• Company strives to cut corners
DEPARTMENTS • Sink-or-swim culture not good for
Asset Management those who can’t swim
Custodial Trust
Derivatives
Equities THE BUZZ
Fixed Income WHAT EMPLOYEES AT OTHER FIRMS ARE SAYING
Global Clearing Services
Investment Banking • “Almost bulge bracket”
Merchant Banking • “Takeover target”
Private Client Services • “Strong firm with basic industry
focus”
• “Still macho”
THE STATS • “Honorable mention”
Chairman and CEO: James E. • “Rough and tumble trading culture”
“Jimmy” Cayne • “Old-school, prestigious”
Employer Type: Public Company • “Going no place fast”
Ticker Symbol: BSC (NYSE)
2001 Revenue: $8.7 billion
2001 Net Income: $619 million
No. of Employees: 10,452
No. of Offices: 22
KEY COMPETITORS
Deutsche Bank
J.P. Morgan Chase
Lehman Brothers
Merrill Lynch
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Bear Stearns
The Scoop
History
Humble beginnings
More than seven decades is a long time to go without an unprofitable year,
but Wall Street luminary Bear Stearns has accomplished just that. Since its
founding in 1923, the firm has never operated at a loss.
With about half a million dollars in capital among the three of them, Joseph
Bear, Robert Stearns and Harold Mayer started Bear Stearns at the beginning
of the Roaring Twenties. Founded as a partnership, the firm initially focused
on brokerage services, operating with a small staff out of a single office at 100
Broadway. Bear Stearns didn’t gain its iconic status immediately, though the
firm did get noticed early in its history. Six years after setting up shop, Bear
Stearns survived the stock market crash without laying off a single employee.
The next decade brought massive changes, both to the market and to Bear.
The rise of the age of government regulation, though, did not hamper Bear
Stearns’ growth as much as it did rivals like J.P. Morgan. Bear eventually
outgrew its office and moved into a much larger space at 1 Wall Street.
Through the 1930s and 1940s, the firm added some important businesses. In
1933 Bear Stearns established a department devoted to corporate bonds and,
in 1940, began trading municipal bonds. Early in the 1940s, it also put
together a utilities department that primarily dealt with the breakup of
massive utilities holding companies. A year later, Bear Stearns established its
investment banking division. In 1949 the company’s history quietly changed
as the legendary Alan “Ace” Greenberg came aboard.
By 1971 the firm had once again outgrown its headquarters. Bear Stearns
found new accommodations at 55 Water Street and quickly set up shop in its
180,000 square feet of space. As the new headquarters was opening, Bear
Stearns was expanding into other markets, opening offices in Dallas, Atlanta
and Boston. Setting its sights across the Atlantic, Bear Stearns opened a
London office in 1980. As the decade drew on, Bear increased its standing in
Latin America and has been one of the leading equity underwriters in the
region.
As the firm’s offices expanded, so did its services. In 1974 Bear added its
now-powerful clearing business (processing stock transactions for smaller
brokers) to its repertoire. Several years later it formed a high-yield bond
(junk bond) department, which also became one of the firm’s hallmarks.
Moreover, Bear Stearns was able to boost its image by being the only firm to
remain in the New York City bonds game during some of the city’s leanest
years. The firm also found profitability in its empty office space – freelance
brokers could rent out space from Bear for free, as long as they cleared trades
through the firm. Though stung by the death of Cy Lewis in 1978, Bear
Stearns rebounded with an even thriftier, harder dealing CEO in Greenberg.
The Oklahoma native would earn a reputation for his eccentricities – and be
credited as a genius for the success that Bear Stearns has since enjoyed.
The 1990s were not as welcoming to Bear Stearns (at least at first). Junk
bonds, in particular, proved a thorn in the side of the firm as it was
increasingly hit by lawsuits resulting from its underwriting activities. The
Bear took its worst hit in 1994 when the bond market collapsed. Suffering
lowered earnings and the exodus of several top-level bond traders, Bear
Stearns took longer to recover from the crash than did much of its
competition. Still, aside from expanding through offices in new global
markets, Bear Stearns earned industry distinction by picking up several high-
profile clients. In 1996 the company made history as it lead-managed
consecutive offerings for the big three of the automotive industry – Chrysler,
Ford and General Motors. Not satisfied with that entry in record books, Bear
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Bear Stearns
The Scoop
In late 1999, Bear Stearns announced a change in its fiscal year-end from June
30 to November 30, lining up with other Wall Street firms such as Morgan
Stanley, Goldman Sachs and Lehman Brothers. Historically, with Bear’s
summer year-end, the firm paid bonuses to employees in August. This made
Bear’s workforce particularly vulnerable to competitors, who would try to
poach Bear bankers in the early fall. According to Investment Dealers’
Digest, Bear’s “oddball fiscal year and its all-cash compensation structure”
allowed Bear employees to “walk out the door with their full paychecks in
hand every August.” With the change, bankers were paid bonuses in January,
which is generally the practice at other firms.
Bear Stearns recently co-lead managed several equity deals, including three
big deals in June 2002: the $156 million IPO for Inveresk Research Group,
the $182 million IPO for CTI Molecular Imaging, and the $210 million IPO
for Pacer International. Bear Stearns also acted as co-lead manager for
Aeropstale’s $225 million IPO; Bear Stearns’s investment in and work on the
retailer’s IPO generated $260 million in net income, over half of Bear’s total
net income recorded in the second quarter 2002.
Bear Stearns has also relished the sweet taste of success in the fixed income
markets. The firm lead-managed the largest municipal bond issue ever – a
$3.5 million issue for the Long Island Power Authority in 1998. In 2001,
Bear placed fifth among all municipal issues, according to Thomson
Financial. And for the six months ended June 30, 2002, Bear placed third
among all muni bond issuers. Recent deals include lead managing a
$500 million issue for TSAC Corp. in July 2002, a $1.7 billion issue for
Badger Tobacco Asset in April 2002, and a $516 million issue for New York
State Environmental, also in April 2002.
In the corporate bond world, Bear Stearns has proven a heavy hitter, taking
the lead role in an $8.4 billion offering for Ford Motor Credit Company, and
a $1.36 billion offering for Lucent Technologies. More recently, Bear co-lead
managed a $174 million offering for AmeriCredit in June 2002, a $275
offering for Hollywood Entertainment in April 2002, and a $200 million
offering for Western Financial Bank, also in April 2002.
Size matters
Given the firm’s cost-conscious reputation, it’s no surprise that Bear Stearns
leans towards lean staffing. The firm has fewer total employees than
Salomon Smith Barney, Morgan Stanley and Merrill Lynch have brokers.
Bear Stearns avoided massive layoffs in 2001 when competitors like J.P.
Morgan Chase and Credit Suisse First Boston were eliminating staff. The
firm did cut approximately 800 people in early 2001, most from the
technology department.
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Bear Stearns
The Scoop
Specialist purchase
Bear took a step toward growing its business in February 2001 when it
announced plans to buy Wagner Stott Mercator, said to be the fifth-largest
specialist firm on the Big Board. (Specialist firms manage trades of specific
stocks, as well as the trades of certain firms.) The purchase is being made in
partnership with Hunter Partners, the seventh-ranked specialist firm. Bear
Stearns owns 49.8 percent of Wagner Stott; Hunter owns the remaining 50.2
percent. Taking less than half interest in the firm means Bear won’t have to
report Wagner liabilities on its balance sheet; Bear will have to report profit
and losses on its income statement, though. Wagner Stott counts Citibank and
Merrill Lynch as its major clients, putting Bear Stearns in the unusual position
of being in charge of the orders of two competitors. The transaction closed
in April 2001.
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Bear Stearns
The Scoop
League Tables
Global Debt & Equity Offerings:
Jan 1, 2001 – December 31, 2001
10 Rothschild 68.5 76
11 Lazard 42.0 87
12 BNP Paribas 23.1 40
13 Cazenove 18.9 4
14 Dresdner Kleinwort Wass. 18.2 43
15 RBC Capital Markets 16.5 34
INDUSTRY TOTAL 590.3 11,585
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The Scoop
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The Scoop
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The Scoop
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The Scoop
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The Scoop
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The Scoop
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The Scoop
Compensation
Pay
Analyst: 1st year: $55,000 (annual salary) + $9,000 signing bonus + $25,000
to $35,000 year-end bonus
Perks
• 3 weeks vacation for associate level and up (less time for more junior
employees)
• Free tickets to sporting and cultural events
• Free meals
• Travel opportunities
professionals.
Organization
CEO’s Bio
In addition to his skills as a manager, CEO James Cayne is quite a golfer and
card player. A few years ago, Golf Digest ranked Cayne 34th on its list of the
top 110 CEO golfers. At the time, Cayne had a 12 handicap. More
impressive, Cayne has won 13 U.S. championships in bridge. He’s
considered such an expert in the card game that he currently co-pens a column
on the subject for the daily New York Sun.
The 68 year-old Cayne, who never went to college (yeah, that’s right), began
his career as a scrap metal salesman in Chicago. But in 1969 former Bear
chairman Alan “Ace” Greenberg, also a formidable bridge player, hired
Cayne at Bear Stearns. During the following two decades, Cayne stayed loyal
to Greenberg, remaining at Bear while many stars in the industry jumped
from firm to firm for big paydays. Cayne’s loyalty paid off. When Bear went
public in 1993, Cayne was tapped to become the firm’s president and CEO.
And less than 10 years later, in June 2001, when a 73 year-old Greenberg
decided to step down as Bear’s chairman board (and fully relinquish control
of the daily operations of the bank), he named James Cayne as his successor.
Because Cayne and Greenberg are such close friends – they play bridge
together and even carpool to work from their homes on Manhattan’s Upper
East Side – it’s a good bet that the transition from a Bear run by “Ace” to a
Bear run by Cayne will be a smooth one.
Business Units
Bear Stearns divides its operations into three major segments: Capital
Markets, Wealth Management and Global Clearing Services. Additionally,
the firm makes markets for clients in derivatives such as swaps, options and
exotic options on a wide range of securities’ sectors, including fixed income,
equity, credit, mortgage, tax-exempt and foreign exchange.
Capital Markets
Investment Banking
Bear Stearns offers M&A advisory services and capital raising abilities. The
firm’s I-banking arm includes divisions dedicated to capital markets,
corporate finance, financial restructuring, M&A and public finance. Industry
focus groups include: consumer, financial buyers and institutions, health care,
industrial products, media, natural resources, real estate, gaming lodging and
leisure, technology and telecommunications.
Institutional Equities
Bear Stearns makes markets in 50 equity markets, and consistently represents
about 10 percent of the volume on the New York Stock Exchange and 30
percent of the short-selling activity. In research, the firm claims it covers
approximately 1,250 companies in 100 industries.
Fixed Income
The firm offers liquidity for investors and distribution power for issuers in
fixed income markets, with one of the largest sales and trading staffs in the
industry.
Wealth Management
Asset Management
Asset management includes portfolio management and mutual funds. The
firm had more than $24 billion in assets under management as of November
2001. The unit provides asset management services to corporations,
governments, multi-employer plans, foundations, endowments, family
groups and high-net-worth individuals.
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Bear Stearns
Organization
Locations
Domestic
• New York, NY (HQ)
• Atlanta, GA
• Boston, MA
• Chicago, IL
• Dallas, TX
• Los Angeles, CA
• San Francisco, CA
International
• Beijing, China
• Buenos Aires, Argentina
• Dublin, Ireland
• Hong Kong
• London, United Kingdom
• Lugano, Switzerland
• Puerto Rico
• Sao Paulo, Brazil
• Shanghai, China
• Singapore
• Tokyo, Japan
Key Officers
Chairman and CEO: James E. Cayne
Vice Chairman: E. John Rosenwald Jr.
Vice Chairman: Michael L. Tarnopol
Chairman of the Executive Committee: Alan “Ace” Greenberg
President and Co-Chief Operating Officer: Alan D. Schwartz
President and Co-Chief Operating Officer: Warren J. Spector
Ownership
Employees own approximately 40 percent of the common stock of Bear
Stearns, which is traded publicly on the New York Stock Exchange under the
symbol BSC.
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Bear Stearns
Vault Newswire
June 2002: Casual clothes a boon for Bear
Bear Stearns reported that net income more than doubled in the second
quarter, thanks in large part to its work on clothing retailer Aeropostale’s IPO
and the strength of Bear’s fixed income unit. Bear booked net income of
$343 million for the period ended May 31, compared with $170 million a year
earlier. Net revenue at its capital-markets division, which includes its
institutional-equities, fixed-income and investment-banking operations,
increased 30 percent to $1.3 billion.
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Vault Newswire
James Cayne, the firm’s top executives, including Cayne, would be taking
approximately 50 percent cuts in pay.
• Bear Stearns lead managed a $500 million issue for TSAC Corp. in July
2002.
• In July 2002, Bear Stearns lead managed a $160 million bond offering for
Sacramento Municipal Utility.
• In June 2002, Bear Stearns co-lead managed the $156 million IPO for
Inveresk Research Group, a provider of drug development services.
• In June 2002, Bear, along with CS First Boston, co-lead managed the $210
million IPO for Pacer International, a provider of freight shipping and
storing services.
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Bear Stearns
Vault Newswire
• In May 2002, Bear Stearns co-lead managed, along with Merrill Lynch,
Aeropostale’s $225 million IPO. (Bear’s investment in and work on the
retailer’s IPO generated $260 million in net income, over half its total net
income recorded in the second quarter 2002.
• Bear Stearns led a $1.7 billion municipal issue for Badger Tobacco Asset in
April 2002
• In April 2002, Bear Stearns lead managed a $516 million municipal issue
for New York State Environmental.
• In April 2002, Bear Stearns, along with UBS Warburg, co-lead managed a
$275 million bond offering for Hollywood Entertainment.
• Bear, with Royal Bank of Canada, co-lead managed a $200 million bond
offering for Western Financial Bank in April 2002.
• Bear Stearns lead managed a $275 million municipal bond offering for
Commonwealth of Massachusetts in April 2002.
• Bear Stearns, with Morgan Stanley, co-lead managed the $100 million
March 2002 IPO for Med Source, a provider of engineering &
manufacturing services to the medical device industry.
• In January 2002, Bear lead managed Synaptics’ $55 million IPO. Synaptics
develops and designs products and services that allow people to interact
with mobile computing devices.
• Bear Stearns lead managed a $250 municipal bond deal for Syre Boro,
Penn., in January 2002.
• In January 2002, Bear led a $150 million municipal bond issue for Broward
County, Fla.
• Bear Stearns co-lead managed, with Merrill Lynch, Alliance Data Systems’
$156 million IPO in June 2001.
• Bear led UTI Worldwide’s $71 million IPO in November 2000. UTI is
warehousing and shipping company.
• In October 2000, Bear Stearns led an $80 million IPO for Informax, a
provider of bioinformatic software solutions.
• Bear Stearns co-managed AT&T Wireless’ $10.6 billion IPO in April 2000.
• Bear advised Time Warner on its $180 billion merger with America Online,
announced January 2000.
• Bear Stearns represented Honeywell Inc. in its $14 billion merger with
AlliedSignal that closed in November 1999.
• Bear Stearns lead-manages the IPO for the World Wrestling Federation in
October 1999. The offering raised $170 million.
• Bear Stearns managed the IPO for online investment bank Wit Capital
Group. The offering yielded approximately $68 million in June 1999.
• Bear Stearns served as global coordinator for a mammoth $8.6 billion bond
for Ford Motor Credit that was sold in July 1999.
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Bear Stearns
Because “there’s very little structure, you have to find your own way” at Bear
Stearns. Says one source: “Every place says they’re entrepreneurial – this
place is entrepreneurial.” The firm also allows for “individual stars to shine.”
Because of Bear Stearns’ “thorough commitment to recognizing individual
merit, those who perform well can really hold their heads up high.” One
junior banker explains, “There’s an openness here to new ideas. If I do
something unique, it’s going to get noticed and appreciated.”
Sink or swim?
While insiders note the lack of handholding that might be present at some
other firms, at least one Bear employee says everyone has “the chance to
become a star player for the firm.” Some employees say the firm has a
“survival of the fittest” mentality that “extends into all ranks.” Bear is “very
much a cowboy culture,” continues another source. “[There’s] lots of
whooping and hollering emanating from the trading floor. A colleague put it
best: ‘Every man is his own corporation, with his own bottom line.’”
Bear employees are quick to point out that the firm is not a completely sink-
or-swim environment, saying that they are provided support from senior
employees. “Bear people are, above all else, individuals, and the culture not
only accepts but applauds this.” Still, the firm makes an effort to encourage
teamwork. I-banking associates are assigned a junior and a senior mentor (a
VP as the junior mentor and an MD as the senior mentor). There are those
who downplay the competitive culture. “The bottom line is to make money,”
says one associate. “If all that they say about back stabbing and sink-or-swim
were true, how the hell would we make any money?” “From a junior
banker’s perspective, the culture encourages development and rewards those
who excel,” brags another insider. “It truly is a meritocracy.”
Whatever you get from your seniors, don’t expect a great deal of formal
training. “Come to Bear Stearns already knowing the job you are to do,”
warns one insider. “Otherwise it will be very difficult. Training simply is not
a priority at this firm.” Those outside the firm’s New York headquarters
report that some formal instruction is “offered over video conference.”
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Our Survey Says
Like most employees on Wall Street, Bear Stearns employees can expect to
spend most of their waking hours at the firm. “Perhaps the worst part of the
job,” employees say, “is the hours.” One employee says that “the number and
variability of hours can ultimately make this job undoable.” Comments one
I-banking associate, who figures Bear’s hours are par for the course:
“Sometimes it’s 50 hours a week, sometimes it’s over 100. Although sales
and trading employees have more reasonable hours than their I-banking
brethren, that doesn’t mean that they have it easy either. “I come in most
Sundays,” says one salesperson. “And I just read.” And, like most employees
at investment banks, Bear employees simply accept the long hours as part of
the deal.
Reports one I-banking analyst: “It’s tough when you’re working 90 hours a
week. Your body just can’t take it – but the compensation’s worth it.” One
source says Bear has “always paid well compared to the rest of the Street.”
Another employee agrees, adding, “Your salary may be a bit low [at Bear],
but the majority of your compensation comes from bonuses anyway.”
Because bonuses are “based on merit,” another comments, “many people are
hush, hush about [them].” Like their sales and trading associates at other
banks, Bear sell-siders receive free tickets to take their clients out. I-bankers
receive a $20 stipend for evening meals, and get free car service home.
“In terms of [ethnic] minorities, we need more,” says one minority contact.
“I think it’s a little hard for Bear Stearns, because we’re not Goldman or
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Bear Stearns
Getting Hired
Hiring Process
Hot jobs
Bear Stearns draws many of its associates from its summer programs. The
summer hiring process is condensed into a three-week period. The first round
is usually an on-campus, two-on-one interview. While students at some
schools will travel to Bear’s New York headquarters for second rounds, many
will simply interview again that evening on-campus. (For example, since the
University of Chicago business school does not excuse time off from classes
to travel for interviews, Bear conducts both first and second rounds on
campus.) The final round in New York is described as “the typical super day
format with analyst-level candidates meeting mostly with associate and VP-
level bankers and associate candidates meeting mostly with VP and managing
director/senior managing director-level people.” That source also reports that
“one of the two co-heads of investment banking generally interviews every
associate candidate.”
The firm also generally targets about 40 undergraduate schools each year. It
hires about 100 analysts into I-banking worldwide, and about 75 of them
work in New York. Although Bear accepts resumes from all undergraduate
schools, for summer analyst positions Bear likes to have representation from
its core schools – the firm only recruits on campus for summer analysts at
Wharton, Dartmouth, Michigan and the University of Virginia.
About 50 to 75 percent of the sales trading, and public finance associate class
is hired through the summer program. In these departments, the firm hires
about 20 to 25 summer associates and about 20 full-time associates. All
fixed-income hires complete 12 weeks of rotations, covering six different
desks, and are placed after that; the equity division hires students for both
specific slots and as generalists. All research positions are hired on an as-
needed basis.
Being there
On-campus college and business school recruiting is the norm. First
interviews are typically on campus. The second round varies; some are on
campus, others on-site, depending on the particular candidate. Two to three
weeks later, the firm calls back its selections for the final screening process.
Candidates are flown out to a Bear Stearns office, most likely a New York
location, at the firm’s expense. Candidates typically meet with at least six
people. Be ready for post-offer, pre-employment drug tests.
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Getting Hired
Questions to Expect
1. Why Bear Stearns?
At Bear and other firms just outside the inner circle of investment banking
giants, contacts stress that candidates must be able to state clearly why they
are interviewing with the firm. The firm sells itself on the opportunities for
early responsibility and advancement in a growing franchise, and you’d do
well to emphasize this as a candidate.
3. If someone gave you a hundred dollars a year for the rest of your life, how
much would you pay him today for that cash stream?
Even though Bear Stearns says it considers people of all backgrounds for
analyst positions, it wants people who are able to deal with analytical
problems.
5. How can we be sure that you are willing to work long hours?
All investment banking requires long hours, and you had better be ready to
deliver. Discuss how you worked long hours in a previous job, summer
internship, or on schoolwork.
all the future cash flows that are too far into the future to project. You can
calculate the Terminal Value in one of two ways: (1) you take the earnings of
the last year you projected, say year 10, and multiply it by some market
multiple like 20 times earnings, and that’s the terminal value; or (2) you take
the last year, say year 10, and assume some constant growth rate after that like
10 percent – the present value of this growing stream of payments after year
10 is the Terminal Value.
Questions to Ask
1. How much responsibility can I expect early on?
Remember, Bear stresses that its employees can expect early responsibility
when compared to behemoths such as Merrill Lynch. Express your eagerness
to take this on.
2. What does the firm see as its position in an industry that is rapidly
consolidating?
Bear has grown slowly for decades and, unlike many of its competitors,
doesn’t seem to be in a rush to add new businesses or expand. Asking this
question shows that you are knowledgeable about the firm’s position in the
industry.
To Apply
If Bear Stearns does not recruit on your campus, or if you are an experienced
professional, you must apply online via the career section of Bear Stearns’s
web site, which reads, “Please be aware that we are not accepting hard copy
resumes sent in the mail for the foreseeable future. If you are interested in
applying for a position, please submit your resume though our on-line
application process.”
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On the Job
Job Descriptions
I-banking analysts start with a four-week training period, which includes “one
week of accounting, one week of finance, one week of modeling, and one
week of database and Bloomberg stuff.” For the accounting and finance
weeks, the firm brings in professors from New York University. Because of
space considerations, much of the firm’s training is held off-site in New York.
And of course, there are the requisite social activities during the training
period. “There’s maybe an event every week,” says one analyst. “We go
bowling, go play pool, go to bars. It’s run by human resources and the
second-years are invited.”
Incoming associates don’t officially join groups until January (after starting
in August), but they usually have already become integral to a group’s
operations. The associates are supposed to rotate every two weeks or so, but
as one associate says: “Bear is a very flexible firm. If the powers-that-be
know there’s money to be made through a situation, and you’re crucial to a
rotation, then they’ll just go ahead and skip the rotation.”
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Bear Stearns
On the Job
12:00 p.m.: Conference call with members of IPO team, including lawyers
and client.
3:00 p.m.: Start to prepare analysis; ask analyst to gather data, do supporting
analysis.
6:50 a.m.: After checking e-mail and voice mail, start looking over The Wall
Street Journal (“I get most of my sales ideas from The Wall Street Journal.
I’d say 70 to 75 percent of my ideas. I also read The Economist and
BusinessWeek just for an overview, and some Barron’s and the Financial
Times. Maybe three issues out of the five for the week for FT.”)
7:15 a.m.: Start checking Bloombergs, get warmed up, go over your ideas
and figure out where things stand.
7:45 a.m.: Meet with your group in a conference room for a brief meeting to
go over the day. (“We go over the traders’ axe [what the traders will focus on
that day], go over research, what the market quotes are on a particular issue.”)
8:15 a.m.: Get back to desk, and get ready to start pitching ideas.
10:00 a.m.: One of your clients calls to ask about bonds from a particular
company. You tell her you’ll get right back to her. Walk over to talk to an
analyst who covers that company.
10:15 a.m.: Back on the horn with your client. (“I’m in contact a lot with my
analyst. I listen to my analyst.”)
12:30 p.m.: Run out to lunch with another salesperson from your group.
(“We often buy each other lunch. Sometimes to celebrate a big deal we’ll
order in lunch. We go to Little Italy Pizza Place or Cosi. It’s always the same
people, and it’s always the same six places.”)
1:00 p.m.: Back at your desk, check voice mail. (“If I leave for 30 minutes
or so, when I get back, I’ll have five messages.”)
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Bear Stearns
On the Job
2:00 p.m.: One of your clients wants to make a move. (“I trade something
every day. Maybe anywhere from one to 10 trades. It’s on a rolling basis.
You plant seeds, and maybe someday one of them grows into a trade.”)
5:30 p.m.: Still on the phone. (“Although the markets close, that’s when you
can really take the time to talk about where things are and why you think
someone should do something.”)
7:30 p.m.: Head for home – you’re meeting a client for a late dinner. (“Often
on Thursdays we go out as a group.”)
Career Path
Undergrads
Like most banks, Bear Stearns’ analyst program in I-banking typically lasts
two years. The program starts with about four weeks of training, followed by
a six-week generalist period (before this period, analysts are asked to rank
three groups, and the firm makes an effort to ensure that the analysts get good
exposure to those groups). After the six-week generalist period, the analysts
re-submit their top three choices. “I would say 95 percent of people got their
first choice,” says one analyst.
Most analysts stay for two years before heading to business school. Some
stay on for three years, “if it is a natural fit.” These analysts can switch
groups and locations. A few outstanding analysts (two in a recent class) are
promoted to the associate level without an MBA after their third year.
Analysts who join on before heading off to business school “rarely come
back,” say some employees. “Analysts have seen the worst and taken the
most grief,” one says. “Everyone needs to let off steam, and analysts, being
the low men on the totem pole, take a lot of abuse.” The firm does not pay
for analysts to get MBAs although it does front for GMAT classes.
MBAs
MBAs in investment banking start in a six-month generalist program. Bear
contacts stress that this is not a “rotation” program but a “generalist”
program, meaning that they can take work from any group at any time.
I-banking MBAs generally spend three years as associates, three years as vice
presidents (VPs), one year as associate directors (ADs), and then become
managing directors (MDs). The next step up is senior managing director
(SMD). The SMD level is a major step up from MD, and the promotion to
that level is not very regimented.
For those on the sales and trading (sell-side) of the Street, the career path is
much less defined. As one Bear insider says: “If everybody leaves the desk,
and you’re the only associate left, and you handle the products, obviously
they’re going to move you up quickly.” In rare instances, for example,
associates can move all the way to the assistant managing director in a year’s
time. A roughly average career path would involve two years as an associate
until vice president, one to two years as a VP, one to two years as an AD, and
then anywhere from one to four years as an MD before moving up to senior
managing director. The move to senior managing director is a major hump.
“It’s like partnership,” explains one Bear employee.
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Bear Stearns
Final Analysis
When the Bear roars, Wall Street listens – and for good reason. Bear Stearns
is one of the most stable establishments in American finance. The firm has
earned its fame through its legendary profitability, as well as its top-of-the-
line services. While not a top finisher in most equity and M&A league tables,
Bear Stearns is still considered a major player. The firm’s fixed income group
is also top-notch, especially its research unit. The Bear’s biggest asset,
however, may be its clearing services, the best in the business.
Recommended Reading
Find out all about Bear’s history at www.bearstearns.com, which also has an
annual report available for download, and reflections from the firm’s analysts.
To learn more about “Ace” Greenberg’s management philosophy, as
documented in his legendary internal memos, check out Memos from the
Chairman, Greenberg’s 1996 book. Memos also includes a foreword by
investing guru Warren Buffet, a Greenberg supporter and friend. We also
recommend checking out the following articles:
• “Bear Stearns’s Profit Doubles On Gain From Aeropostale IPO,” The Wall
Street Journal, June 19, 2002.
• “Bear Stearns exec’s balancing act,” The Daily Deal, June 5, 2002.
• “Bear Stearns and Lehman Push Their Way Past Big Guns,” The Wall Street
Journal, July 6, 2001.
• “At Bear Stearns, an ‘Ace Is Shifting Gears,” The Wall Street Journal, June
27, 2001.
• “S.E.C. Fines a Bear Stearns Unit in Fraud Case after Long Inquiry,” The
New York Times, August 6, 1999.
• “Bear Stearns Income is Up, as Fees Grow from Trading,” The New York
Times, July 22, 1999.
• “The Optimist: Is Ace Greenberg the Sanest Man on Wall Street?” The New
Yorker, April 26 – May 3, 1999.
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