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Reflections of a Legendary Deal Maker

I spoke recently with Peter J. Solomon (HBS ’63), founder of Peter J. Solomon Company (“PJSC’). PJSC is one of Wall Street’s most successful M&A specialty firms, having advised on more than 250 deals. Mr. Solomon founded the firm in 1989, after co-chairing Lehman Brother’s investment banking division. Solomon, who also served stints as Deputy Mayor for Economic Policy and Development under New York Mayor Ed Koch and Counselor to the United States Treasury during the Carter Administration, developed a reputation as a leading banker in the retail and distribution industries. His firm has followed suit, first building its rep in the retail and consumer goods industries, and now branching out into other sectors, such as healthcare and media.

Harbus: When and why did you decide to start your own investment bank?
Peter Solomon: I thought about starting the firm for many years as I considered the direction Wall Street was headed. There was a need for objective unbiased advice which the larger firms would not supply. Larger investment banks are more interested in managing their own money.

Now, they look more like hedge funds, [and] there are too many conflicts of interest between investment banks and their clients for banks to give objective advice. Conflicts of interest clearly have been demonstrated in equity research but they exist in other areas as well. Moreover, investment banks no longer have the experience, in terms of senior level talent and age, to provide the advice that senior executives got 30 years ago.

Harbus: What does the future hold for boutique investment banks?
PS: It really depends on what the boutique does. If you are in the business of providing advice and execution to clients, the future is rosy today. There are few top investment bankers at major firms. Traditional investment banking isn’t as important to them. Power over the years, at Wall Street investment banks, has shifted to the traders. If you look at major investment banks today, they are not run by bankers. Boutiques that offer valuable advice have a bright future because they can concentrate solely on their clients’ needs and devote their energies to offering solutions without the distraction of trading, underwriting or publishing research.

Harbus: Why did you accept the position of Deputy Mayor of Economic Policy and Development for New York?
PS: I was always interested in government even when I was at Harvard College and at Harvard Business School. At some point, I thought that I would go into government, though not necessarily at the local level. I was offered the job by Mayor Edward I. Koch and my former boss at Lehman Brothers, Peter G. Peterson (who later co-founded The Blackstone Group) advised me to take it. He thought that it was the 2nd most important economic job in the country at the time because New York City was embedded in a financial crisis and it was not clear that the City would make it. Also he thought that it was a great opportunity for me professionally.

Harbus: Why did you accept the position of Counselor to the United States Treasury?
PS: I was close to President Jimmy Carter and I think that it surprised the Carter Administration when I took the job as Deputy Mayor of Economic Policy and Development in New York City because they thought I was going to wait for a position in Carter’s Administration. When a position with Carter was presented to me, I wasn’t initially going to accept it because I thought that Carter would lose his reelection in 1980. However, a former Harvard College professor, the late Senator Daniel Patrick Moynihan, encouraged me to take the position in the Treasury as a learning experience; so, I did.

Harbus: What are the major differences between working in the public and private sector?
PS: Time and the sense of time. In government, process and consensus are critical if you want to affect change, and that takes a lot of time. In business, however, immediate results are most important. Companies promote results and place constant pressure on the bottom-line. Responsibility is also different. Within government, it is hard to pinpoint

responsibility unless you are the highest elected official. In the private sector, you know who is responsible.

Harbus: What advice would you give current HBS students?
PS: Have a long career – take risks! HBS students often are mesmerized by the flavor of the month, lured by what is fashionable. Students should learn everything they can about where they are going to work. They should research the company or organization where they are thinking of working and evaluate the people they are working with and for. And, if the job doesn’t work out, quit and find a job you are passionate about. You’ll be much happier.

Entrepreneurship. It’s great to be an entrepreneur. It’s wonderful to work for yourself. I would encourage everyone to attempt to work for themselves.

HBS students also have an obligation to be active outside the business sector. I spend 30%-40% of my time now involved in philanthropy and working in the volunteer sector. I think philanthropy is a defining characteristic of America. Historically, HBS people have really been good about giving back.

April 26, 2004
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