Eighteen months and a swirl of mergers later, William B. Harrison Jr. has fulfilled the destiny that long eluded his company, and not a moment too soon.
Mr. Harrison, 57, took over as chairman of Chase Manhattan Corp. last January, having already spent six months as its chief executive officer. Even before New Year's Day of 2000, he had completed the purchase of Hambrecht & Quist, a San Francisco investment bank that specialized in arranging initial public offerings for emerging technology companies.
The acquisition frenzy did not stop there. No longer content to wait for the big, transformational deal to come his way, Mr. Harrison snapped up Robert Flemings Holdings, a U.K. asset management and investment banking boutique, and Beacon Group, a New York advisory shop.
In September, Mr. Harrison landed the big one: a $33 billion agreement to acquire J.P. Morgan & Co., the storied Wall Street investment bank.
"This is a critical merger for this company," Mr. Harrison said in an interview last month, just before the deal for J.P. Morgan closed on Dec. 31. "It does basically make us complete as a global investment bank, and that's something that Chase was not."
The merger was emblematic of a year of deals in which U.S. and European banks scrambled to maintain market share in capital markets and high-net-worth private banking. Charles Schwab & Co. started the trend in January 2000 by announcing plans to acquire U.S. Trust Corp. of New York. The deal fused Schwab's popular online brokerage and banking services with U.S. Trust's expertise in providing trust and investment management services to the superrich.
Merger rumors swirled on Wall Street throughout the summer. Many wondered how Lehman Brothers, Goldman Sachs Group, PaineWebber Group, and J.P. Morgan could continue to compete in the increasingly consolidated world of Wall Street against rivals with far larger capital bases, including Morgan Stanley Dean Witter & Co. and Merrill Lynch & Co.
By the summer the Swiss banking company UBS AG had swooped down with a deal for PaineWebber, and Credit Suisse First Boston struck a deal for Donaldson, Lufkin & Jenrette Inc.
For its part, Chase had long searched for a partner that would catapult it into the ranks of Merrill and Morgan Stanley, especially in stock underwriting. The company had talked to everyone over the years, Mr. Harrison said. Two years ago Mr. Harrison approached Morgan about a deal but he was rebuffed.
J.P. Morgan, led by chairman and chief executive officer Douglas A. "Sandy" Warner 3d, spent the last decade attempting to build its equity underwriting capabilities, and the effort proved to be expensive. J.P. Morgan rose in the rankings of stock underwriters by the end of the 1990s, but global consolidation among the biggest three in the field kept it out of the top tier.
The company founded by the family of 19th-century financier J. Pierpont Morgan was able to put off suitors only for so long, and after Chase embarked on its self-improvement campaign this year, J.P. Morgan was finally willing to make the move. By late summer, it was widely rumored on Wall Street that Morgan was looking for a suitor. Mr. Harrison again approached Mr. Warner in August, and a deal was cobbled together in a matter of weeks.
"It's been the most exciting year of my career," Mr. Harrison said. "It's been a very busy year, a very challenging year, a very intense year, but a very satisfying year."
It remains to be seen just how well the Morgan-Chase combination will work. With a business mix that is tilted decidedly in favor of corporate and investment banking activities, the new company's performance depends on how well the bankers exploit J.P. Morgan's vast product set and Chase's large customer base to extract additional business.
But the company also emerges during an economic slowdown. In December, Chase and J.P. Morgan said their combined fourth-quarter profits would fall short of expectations because of higher compensation expenses - Chase in particular had to honor bonus commitments made to the companies it acquired - and declining revenues from market-related activities.
In the fall, facing a slump in Chase and J.P. Morgan's share prices, top executives went so far as to send a memorandum to employees reiterating their commitment to the merger.
The firm still has some work to do to get itself into the top tier of stock underwriters. J.P. Morgan Chase & Co., as the new company is known, ranked eighth globally last year among equity underwriters and ninth among underwriters of initial public offerings, according to combined data provided by Thomson Financial Securities Data. It ranked seventh in U.S. equity underwriting and in U.S. IPO underwriting, according to Thomson Financial.
Morgan-Chase also entered 2001 as a hodgepodge of cultures, the result of Chase's acquisition schedule and the feverish pace at which those deals were closed. The last few months of last year were particularly chaotic, Mr. Harrison said. Chase and J.P. Morgan worked swiftly to identify 1,000 or so managers for the combined company, culled from the ranks of Chase, J.P. Morgan, Flemings, Chase H&Q, and Beacon.
One big cultural hurdle to overcome: Many of Chase's current employees had grown accustomed to merger integrations. Before J.P. Morgan, they had survived two in the New York market: the 1991 merger of Chemical Banking Corp. with Manufacturers Hanover Corp., and the 1996 combination of Chemical and Chase. J.P. Morgan does not share the collective merger experience.
Still, the J.P. Morgan deal is "going better than any of our other previous deals," Mr. Harrison insists. "The quicker you can do these kinds of transactions, the better off everyone is."
Mr. Harrison is using a playbook he inherited from his mentor and predecessor, Walter V. Shipley, though close associates say he has accelerated the realization of Chase's longtime strategy. "He quickly decided that you could wait forever for a transformational deal. It's time to get going," Mr. Shipley said in a December interview.
Said Mr. Harrison: "We always had a vision on the wholesale banking side. How you got there was less clear."
Tall and athletic, with a slight Southern accent, Mr. Harrison is known to be intensely competitive and always on the move.
Erskine Bowles, the former White House chief of staff and a friend of Mr. Harrison since prep school, described a recent summer vacation at Mr. Harrison's house in Maine. A group of friends, he said, were subjected to a "dusk to dawn" schedule of activities in the backyard - horseshoes, badminton, volleyball.
One day it rained, and one of the guests expressed relief that the weather would provide a break, Mr. Bowles said. Just then, Mr. Harrison emerged in the living room to announce that the Ping-Pong table had been set up in the garage, and the games could commence.
"You have to lead, follow, or stand aside," Mr. Bowles said. "There's not much follow or stand-aside in Bill Harrison. He's constantly challenging himself. And he's used to winning."
Mr. Harrison, a native of North Carolina, graduated with an economics degree from the University of North Carolina-Chapel Hill and spent the first two years of his banking career as a trainee at Chemical Banking Corp. In 1969 he joined Chemical's corporate and correspondent banking group. His first big promotion came in 1976, when he was dispatched to San Francisco to run banking operations on the West Coast.
He was scheduled to return to New York in 1978 to run banking operations in the northern suburbs. That's when Mr. Shipley, then head of international operations, intervened. "That was not the right move for Bill," Mr. Shipley said.
Camped out in a hotel suite waiting to return to New York, Mr. Harrison recalled thinking, "I wasn't depressed about the assignment, I was depressed to be leaving San Francisco."
Mr. Shipley made a phone call to Chemical's chief executive officer, and things changed. Come Monday, instead of heading for the suburbs of New York, Mr. Harrison found himself at a new desk in London with the title of senior vice president and regional coordinator.
"It was a very fortunate move," Mr. Harrison recalled in December. "I went from running a unit with 15 people to one with 1,200 people. And it gave me a global perspective."
He brought a tech-intensive focus to the CEO job and marked his debut in the role with the launch of Chase.com, a unit designed to cull ideas from business units and incubate technologies.
During Mr. Harrison's tenure as CEO, Chase has also put its private equity unit, Chase Capital Partners, under a brighter spotlight that emphasizes the unit's stakes in a range of emerging industries, including technology, media, and telecommunications.
Mr. Harrison has a reputation within his company as one to make decisions quickly, Mr. Shipley said. "He doesn't dwell on them the way I used to. He makes the tough calls easier than I would, especially when it comes to people issues."
Observers said one of the rationales behind the pre-Morgan deals for Hambrecht & Quist, Flemings, and especially Beacon was the addition of expertise to Chase's management ranks.
For example, Geoffrey Boisi, a well-regarded Wall Street rainmaker who founded the Beacon Group in 1993, succeeded James B. Lee Jr. last year as head of investment banking. This allowed Mr. Lee, a vice chairman, to spend more time building client relationships.
Mr. Boisi's presence landed a plum assignment for Chase as advisor in one of the biggest deals of last year, General Electric Corp.'s takeover of Honeywell Inc. The Beacon deal also brought David A. Coulter, the former CEO of BankAmerica Corp., who succeeded Donald L. Boudreau as head of Chase's global consumer operations.
Mr. Harrison's management style echoes the consensus-building style of Mr. Shipley. Associates said Mr. Harrison gathers his top lieutenants around a table once a week and lets them vent their spleens. "He's quite comfortable with dissonance, and he tries to find a consensus," Mr. Lee said. "Everyone has to have an opinion."
His working relationship with Mr. Warner, who is now chairman of Morgan-Chase, may also reflect his experience with previous mergers, especially that of Chase and Chemical, after which Chase chairman Thomas G. Labrecque took the title of president.
Mr. Harrison said he has known and been friends with Mr. Warner since his time in London.
The two have been traveling together almost constantly since the merger was announced, to discuss the transaction with employees and clients. "He's a great partner," Mr. Harrison said.
Mr. Shipley, who has observed the Morgan-Chase merger integration process from his part-time office in the executive suites at Chase headquarters, said he sees similarities to Chase's previous deals. Mr. Labrecque he said, "took a completely supportive role" in the Chase- Chemical transaction. "All indications are that" Mr. Warner "is doing that as well," he said.
The two executives will have to guide Morgan-Chase through the treacherous economic waters foreseen for the next few months. Mr. Harrison said in early December that the company was anticipating a soft landing for the economy. By the end of the month J.P. Morgan economists were predicting a hard landing, though not a recession.
The declining fortune of New Economy companies is also on the market's watch list. Morgan-Chase, through subsidiaries like Chase H&Q and Chase Capital Partners, has a big stake in the recovery of the sector.
Mr. Harrison said he believes the market has overreacted to the sector's problems. "I believe in the power of convergence of the Old Economy with Internet technology," he said. "But there has been a shift in view. Maybe the Internet companies by themselves are not as valuable."
Another notable issue last year was the effect of the Gramm-Leach- Bliley Act, the financial services reform legislation that had its first anniversary in November and was supposed to spark a big wave of convergence among brokerages, banks, and insurers. Like many bankers, Mr. Harrison said the law has yet to show its full potential.
"Gramm-Leach-Bliley has not played out to be as helpful as we had hoped," he said. "Investment banks haven't decided to become regulated by the Fed. It still is not as level a playing field as we had hoped."
Mr. Harrison shows every indication that he enjoys the changes swirling about him. "It's a lot more fun being a CEO than I would have guessed," he said. "I feel very relaxed about it."
