Piercing the Irish Ceiling: The Story of a Boston Irish Catholic Who Reached the Top of the American Investment World by Robert E. Riley

Author:Robert E. Riley
Language: eng
Format: mobi
ISBN: 9780615485386
Publisher: BookMasters
Published: 2011-12-26T14:00:00+00:00

XIII.

PIERCING THE CEILING

The 1970s were eventful and exciting years for Putnam and for me. In 1970, Putnam was acquired by Marsh & McLennan Companies. The story behind this acquisition borders on the bizarre.

As previously mentioned, in 1964 Putnam acquired the Parker Corporation headed by William “Brother” Parker. I’m guessing that in the late 1960s, Brother was in his mid-seventies. As a major stock holder of Putnam, he wanted to exchange his holdings for more liquid assets. George Putnam was taking on the treasurer’s job at Harvard and also wanted to exchange his holdings for more liquid investments. Ted Lyman and Bill Hunt wanted to cut back on work and spend more time fishing and hunting. Jack Goss and I, whose holdings together were a small minority of the Putnam stock, really didn’t count in determining whether or not to sell the company. However, the build-up of our investment management capability in the late 1960s and my emergence as a senior executive candidate, gave Putnam far more substance and appeal to a potential buyer than the Putnam of the early 1960s.

In the two years leading up to the Marsh deal, we talked to a number of potential buyers. One of the weirder schemes was to merge Putnam with the big direct sales force fund company, Waddell & Reed in Kansas City, and have this two-headed monster be acquired by General Telephone, of all companies. One problem at the time was that there would have been no clear leadership capability of this combine within Putnam, Waddell & Reed, or General Telephone—George had other interests, nobody at Waddell & Reed was up to the job, and I had not quite moved into the senior management role at Putnam that would come later. Believe it or not, we also almost merged with Geico, the cut-rate insurance company, which had zero in common professionally or culturally with Putnam. Thankfully that went by the boards, but by 1970 Putnam was getting a little shopworn.

Enter Marsh & McLennan. Marsh, whose earnings growth had not quite caught up with its stock price in the late 1960s, was looking for a way to use its high price/earnings ratio to add to earnings per share. At that time, the CEO of Marsh was an insurance broker named William F. “Fritz” Souder who didn’t know much about the mutual fund business, to say the least. Fritz had hired a head of development named John Gates to make acquisitions for Marsh. Gates found Putnam, which by then was like a mare in heat to be acquired. Fritz was the stallion and a deal was done.

Forty years later, the deal looks like it was a fabulous one for Marsh. In 2007, they sold Putnam for $3.9 billion, or more than one hundred times the 1970 purchase price of $36 million. The Putnam deal was one of the two most successful purchases in history of a money management organization by a non-asset management company buyer.

The other was the American Express purchase of Investors Diversified

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