John G. Duffy, the co-chief executive officer of Keefe, Bruyette & Woods Inc., lost his son and his business partner when terrorists hijacked jets and slammed them into the World Trade Center towers. Hes determined not to lose his company.
We fully expect to rebuild our franchise in, I would hope, fairly short order, he said in a phone interview last week.
Mr. Duffy co-heads Keefe Bruyette with Joseph J. Berry, who is missing and presumed dead, one of 67 Keefe Bruyette employees lost. More than 100 Keefe Bruyette staff members were working in the building at the time of the attack. Among those lost was Mr. Duffys own son Christopher M. Duffy, a trader at the company.
The tragedy of Sept. 11 shattered the family of financial-services investment banking and advisory specialists Keefe Bruyette, Sandler ONeill, Marsh & McLennan, and others. And, as so starkly exemplified by Keefe Bruyette, literal families were shattered too parents and children, husbands and wives, brothers and sisters.
In the interviews for this story Keefe Bruyettes executives addressed, more or less unbidden, the emotional issues they and other members of their firm had encountered since the attack even as they provided details of efforts to restart the firms business operations.
In the conversations which included Mr. Duffy, as well as Andrew M. Senchak, vice chairman and head of corporate finance, and Thomas B. Michaud, head of equity sales and trading three big themes emerged.
At the top of the list was the help other firms provided to Keefe Bruyette in its efforts to rebuild. Such firms include the M&A law firm Wachtell Lipton Rosen & Katz, which Keefe Bruyette counts as a friend, and many other companies currently in negotiations with Keefe Bruyette and, by all accounts, highly unlikely to demand any kind of haste on its part.
Executives also answered questions about the prospects of its financial-services M&A practice and about efforts to reconstitute what is undoubtedly a unique research staff.
Unlike Mr. Duffy, Mr. Michaud and Mr. Senchak were present at the firms temporary headquarters at Wachtells midtown offices. But Mr. Duffys absence did not blunt his focus or his gratitude.
Our friends have been critical, in terms of helping us get up and running, having a place to be. The majority of our business lines became operational on very short notice. We could not have done that on our own.
I cant tell you the degree of sympathy from our clients and our friends and everybody that we have done business with in the last years, said Mr. Senchak. And Mr. Michaud added, In all the badness that had happened, you realize there is hope.
Keefe Bruyettes relationship with Wachtell goes back to the 1970s. When we were bombed in 1993, this is where we went, Mr. Senchak said. I was here Tuesday, and people came here without any questions. We have relations with other firms on the Street, but this is just friendship.
To hear the executives tell it, Keefe Bruyette has already come back to its first-half pace its best ever, Mr. Berry told American Banker last month.
Mr. Michaud: There is very little debate about things. Everybody knows the direction. Lets go.
Mr. Senchak: I never had any doubt that we would be back up and running. Sales and trading is open, and investment banking is here.
On Sept. 18. the day Keefe Bruyette resumed trading, it set a company record, Mr. Michaud said. We are short of staff, but we were able to do that!
Though it could have opened for business Sept. 17, the firm felt it would be prudent to take a day to test the systems, he said. We wanted to make sure that we were able to have a smooth transition from Boston, where the firm has another trading floor. Keefe Bruyette is currently trading in listed issues only, but it plans to trade over-the-counter again soon.
Nor does Mr. Senchak expect any disruptions in the firms underwriting schedule.
On Tuesday, Irwin Financial Corp., a $3.3 billion-asset company headquartered in Columbus, Ind., announced that is would sell $75 million of common stock, underwritten by Keefe Bruyette, among others. Also Tuesday, Keefe Bruyette conducted a best-effort offering for Allied Financial in Chicago.
We expect the investment banking business to stay within the band of expectation we had before, Mr. Senchak said. Supporting our investment banking business, we have to rebuild our listed trading and parts of our research. However, we think that our overall investment banking franchise is sufficiently strong that we have enough time to rebuild it in a solid way.
He said that Keefe Bruyette is working on 12 banking transactions in various stages of conversation. Including the broker-dealer and insurance lines, the firm has around 20 deals in the pipeline. In addition, four fixed-income transactions are in the works, as well as one trust-preferred transaction in insurance and another in banking.
David P. Lazar, co-head and managing director of investment banking at Berwind Financial LP, the investment banking affiliate of Philadelphia-based Berwind Group, said no company in negotiations with Keefe Bruyette will put pressure on it to get a deal done. Mr. Lazar, who mostly represents smaller banking companies and often sits across the table from the firm, said that all his clients understand the difficulty Keefe Bruyette is working under.
Financial services M&A will not slow down as a result of the Keefe Bruyette and Sandler tragedies, he said, but there will be some transactions that might take longer to get done.
Unless there is damage to the loan portfolios, Mr. Lazar said, I dont necessarily think that there will be a tremendous impact on the merger and acquisitions business.
Replacing a team of traders and analysts such as those employed by Keefe Bruyette and Sandler may be harder to pull off quickly, Wall Street observers say. Give me a week, and we can talk about it, said one headhunter, showing respect for those not confirmed dead.
Aside from traders, the attack took a particularly hard toll among Keefe Bruyettes research analysts.
Many of the companys senior research staff are among those unaccounted for. David S. Berry, a principal and director of research, is confirmed dead. (He is not related to the firms co-CEO or his son.)
Thomas F. Theurkauf, a principal and analyst following large-cap banking companies, often said that Keefe Bruyette takes research very seriously . we are not stock-pushers. Mr. Theurkauf is among the missing.
Also among the missing are Marni Pont ODoherty, a bank analyst, and Dean P. Eberling and L. Russell Keene 3d, who covered brokerage stocks for Keefe Bruyette.
Mr. Duffy said that the research team is doing everything it can, especially as the close of the third quarter draws near, to provide at least basic coverage on the companies it follows.
Mr. Duffy and Mr. Senchak made no secret of plans to promote junior staff members as needed a task reminiscent of what the New York City Fire Department was forced to do in the wake of its staggering losses.
Keefe Bruyette is also prepared to tap into the rich resource of its alumni network, Mr. Senchak said. We supplied a lot of people to the Street, maybe we get some back, he said.
Among the voices of support on Wall Street was Frank Barkocy, the director of research at Keefe Managers Inc., which was founded and headed by Keefe Bruyette co-founder Harry Keefe. Mr. Keefe left Keefe Bruyette in 1989 to form a separate company. Mr. Barkocy said that he has offered his own research files to Keefe Bruyette, as well as help in finding new analysts.
We are prudent in the people we add, Mr. Michaud said, because we want to be best in class. There are countless examples of heroism within our company.
Mr. Senchak added: That kind of talent, that kind of ability, will be used much more.
I cant tell you the degree of spontaneous support we had, Mr. Senchak said, and sympathy from our clients, and our friends, and everybody that we have done business with in the last years. But that is almost a secondary story right now from what happened Sunday.
What happened two Sundays ago, Sept. 16, was a prayer service, arranged by Keefe, which it expected around 200 people to attend. More than 2,500 came, Mr. Senchak said. People leaving the service brought traffic to a halt in front of the church, on Manhattans Fifth Avenue.
Like other firms devastated by the terrorist attacks, Keefe Bruyettes motivation to get things up and running quickly reflects its need to support the families of all those lost, Mr. Duffy said.
Mr. Michaud echoed Mr. Duffys thinking. Moving the firm forward means we can do more for the families.
And likewise Mr. Senchak: We are worried about the people. If the people are in good enough shape, the business will get done. We want to get going again.
The firm remains private, but ownership is spread out over many employees an advantage in a time of crisis, Mr. Duffy says. Ownership is always an issue when you have a more concentrated shareholder base, he said. Some of the steps we took in the last couple of years to flatten out the ownership are going to help us here.
Keefe Bruyette has established the KBW Family Fund to support the families of colleagues missing and dead.
Despite our own grief, the grief of the larger family, I think it made it all the more poignant that Tom [Michaud] got its [sales and trading] group up for business Monday, Mr. Senchak said. My instinct has always been that business would take care of itself. What we really had to do is taking care of the grief right now.
It struck me that what we had always regarded as an extended family was truly that, Mr. Senchak said. We think of it as an enormous underground reservoir we tapped into, that we didnt know it was there until it was needed.
