In a globalized business world, such issues may seem insignificant. Already, the American and European financial industries were deeply intertwined. Nevertheless, I had been around Washington’s political class enough to know that it was an issue that loomed large in their minds. When he heard about the proposed deal, Senator Chuck Schumer was quoted in the Wall Street Journal as asking Niederauer, “Why are you doing this? Do you not care about New York?”2 Ted Kaufman, then Chair of the Congressional Oversight Committee on the Troubled Asset Relief Program, echoed this concern about the loss of NYSE to a German company, declaring it “a signpost on the road to American decline.”3 Overheated rhetoric aside, a Nasdaq-NYSE merger was a powerful answer to those concerns, and we spent time making that argument in Washington and in New York. Interestingly, one person who did seem to appreciate the patriotic appeal of a combined American equities franchise (and a rebuff of the German company’s takeover attempt) was Donald Trump, who sent me an article about our bid from the Wall Street Journal with the scrawled message, “Go, Bob, Go!”
In mid-April, we submitted the first round of documents, known as the HSR filing, to the DOJ. A few weeks later this was followed by the “second request,” a much more extensive affair. This is the discovery procedure by which the Justice Department investigates mergers and acquisitions that may raise anticompetitive concerns. Or, as I called it, the “proctology exam to end all proctology exams.” Fulfilling the second request was an incredible amount of work, and we ended up submitting what seemed like an entire roomful of documents about the proposed merger and the combination of companies—responding as best we could to all of the investigative needs of the DOJ.
Antitrust law in Washington is big business, and we must have had close to one hundred contract attorneys working on this case at the height of the process. Many were formerly at the DOJ in what is largely a revolving door of people going between government and private practice. In fact, Christine Varney, the Obama appointee who headed up the Antitrust Division at the time of our proposal, is a perfect example. As of this writing, she is currently head of antitrust at a major law firm, helping large companies negotiate antitrust scrutiny. In 2011, she was the primary person deciding the fate of our intended merger. Indeed, her position held a unique power. The head of the SEC, by contrast, is one voice among five. Likewise, the Chair of the Federal Reserve is one voice among twelve on the Federal Open Market Committee. The head of the Antitrust Division has more power concentrated in that position than either of those other institutions.
While we complied with the demands of the DOJ, we also had to convince NYSE shareholders to allow time for that process to unfold. Indeed, despite the Nasdaq ICE proposal being a much better deal—more than a billion dollars higher—NYSE was still trying to move ahead with Deutsche Boerse. A few weeks after our announcement, NYSE announced that they had suddenly discovered an extra $100 million in cost savings that could be had from a deal with the German exchange. Clearly, NYSE management was scrambling to make its preferred deal not look so paltry in comparison to ours.
The antitrust concerns didn’t help our cause, but the truth was that the rival bid had its own regulatory hurdles. It would have to be cleared by the Committee on Foreign Investment in the United States (CFIUS) and by regulators in Brussels. Our proposal also contained a $350 million sweetener, a cash payment if the deal ended up shareholder approved but killed by the DOJ. Meanwhile, some NYSE shareholders were asking their Board and management to discuss terms with Nasdaq, concerned that the Deutsche Boerse deal undervalued the company. In an effort to win more support, on May 11 we wrote an open letter to NYSE shareholders, imploring them to consider our offer and not settle for an inferior deal. It was titled “What’s the Rush?”
“Why are NYSE Euronext stockholders being asked to approve a high-risk, low-value transaction without all of the facts?” we asked. “Why is your Board rushing you into a vote? And why are they refusing to even meet with Nasdaq-OMX and ICE to explore a clearly financially superior alternative?” The letter went on to restate the benefits of the merger and show why the Nasdaq ICE deal offered superior value. It ended with a direct appeal to the shareholders: “The NYSE Euronext Board has rushed to its own judgment without a willingness to consider the facts available to them—don’t let them railroad you into the clearly inferior Deutsche Boerse transaction without all the information you need in order to make an informed decision as the ultimate owners of NYSE Euronext. Demand of your Board that they meet with us, and at the same time ask them, ‘What’s the rush?’”
As we prepared our argument for the DOJ, our biggest concern was the listings business. Our first plan was to argue that the listings market was global. With more and more Chinese and Israeli companies listing in the United States, a number of public companies in Asia listing in Hong Kong or Singapore, and quite a few European and African companies listing in London, we hoped this would be a compelling story. The difficult part was that almost all national companies still listed on Nasdaq and NYSE, rendering our proposed merger an effective national monopoly. So as a backup, we prepared a number of what are known as “remedies.” For example, I called up Joe Ratterman, the CEO of BATS, another large national exchange, and had some preliminary discussions about how we might maintain a competitive listings market following a Nasdaq-NYSE merger. Would BATS be interested in taking on a thousand or so selected listings from NYSE? Essentially, we might need to establish a “credible competitor” in the listings business, and BATS seemed the only candidate. On the advice of counsel, we kept these remedies in our back pocket, ready to use after we received a response from the DOJ.
When we finally submitted the second request to the Antitrust Division, we expected it would take them a long time just to wade through the volume of material. After all, we had just landed a veritable tsunami of papers on their doorstep. We prepared ourselves to wait for a response, even as we continued to argue for the merits of the deal publicly and to NYSE shareholders.
In the meantime, I decided to take a brief break. After all, second-round requests can take a month or longer to review. By chance, I had received the invitation to play at Augusta. It was a unique opportunity and came at the perfect moment. Or so I thought. On Tuesday, May 10, I took a much-needed day off and headed down to Georgia. I tried to put the deal out of my mind and soak in the atmosphere of the celebrated course that has been host to the talents of so many great golfers over the last century. Until, that is, the second shot on hole number ten, when my phone blew up and my pleasant interlude in Augusta was superseded, courtesy of the DOJ.
The DOJ was going to sue to block the deal, Ed told me. They would be announcing it Monday.
“What?” It was a punch in the gut. “How can they possibly have considered our proposal? There is no way they could have reviewed a tenth of what we sent them. We haven’t even discussed possible remedies.” I was exasperated but tried to keep my voice down.
“I think it’s quite clear that this has been planned for some time,” Ed responded. “Their position was already set. They were just waiting on our submission. They’re giving us an hour on Friday to come in and argue our case.”
“Varney must be using this as an excuse to hold a press conference, where the Antitrust Division gets to have a nice moment in the limelight—at least that’s how it looks to me.” Perhaps I was being unfair, but it was impossible to draw any other conclusion.
After all our careful strategizing about how to release our remedies, now we had only one course of action: to fire everything we had, all at once. I intensified my conversations with Ratterman at BATS over the following couple of days. That Friday, we met with the DOJ. We argued that our submission contained valuable information and was at least worthy of their time and consideration. In addition, we explained our plans to enlist BATS as a listings competitor.
The response was warmer. But it changed nothing. They still were going to announce that they were suing to block the deal. Afterward, they w
ere open to meetings with us. It seemed that nothing was going to keep them from having that press conference.
It was possible to beat the DOJ in antitrust court. We had done it at SunGard, but that was a special situation and an expedited process. Plus, it had nowhere near the media prominence that this situation did. Fighting the DOJ might take a year or more, and it would be hard to be in a suspended situation regarding a huge deal like this for any length of time. The whole business would be in a state of uncertainty, and that’s never a good thing. And it only heightens the downside if you lose. Fundamentally, I didn’t want to risk it.
On May 16, 2011, the DOJ had their press conference, and we announced, with great reluctance, that we were abandoning our pursuit of NYSE. We would not sue for the merger to go through. But it wasn’t over yet. There was still a glimmer of hope—once we got through the press conference—that further conversations with the DOJ might be fruitful. We had officially dropped our bid, but unofficially we were still planning a new series of backroom talks with Varney and her team. They were willing to listen. Perhaps we could still salvage the deal with the proper remedies.
After a series of intensive discussions, Ratterman and I had finally arrived at the outline of an agreement. We would sell one thousand NYSE listings to BATS after the consummation of the deal. As we described those plans to the DOJ, they seemed receptive. But somewhere in the discussions, we came to a critical sticking point. We couldn’t sell only NYSE listings, they told us. Some would have to come from Nasdaq as well. The whole idea was sounding worse by the minute.
Furthermore, the DOJ told us they would need to verify that this BATS listings proposal was a credible possibility by conducting what they called a “field test.” That would mean asking companies directly what they thought about it! That was a line we couldn’t cross. I imagined some antitrust attorney from the DOJ calling up Steve Ballmer: “Hi, Steve, this is the Department of Justice. This idiot over at Nasdaq, Robert Greifeld, is wondering if Microsoft would be okay about Nasdaq selling your listing to BATS exchange. We’re not saying this will happen. It may not. But you know, just as a theoretical possibility, how does that sound?”
Replaying that conversation with about fifty of our loyal, longtime companies made me sick to my stomach. There was no way I could allow it. It was one thing to lose a thousand NYSE listings that we never even had. It was another thing altogether to start putting Nasdaq stalwarts on the chopping block. It was an unacceptable remedy.
It was over. I was deflated. At least with LSE it had been our own decision to back away from the acquisition. Here, it was decided for us. But the outcome was the same. I had reached, once again, for that vision of a consolidated global listings franchise and had been beaten back. I had ogled the unobtainable once more, and had paid the price in frustration.
A Painful Postscript
With Nasdaq and ICE out of the way, NYSE was free to complete the deal with Deutsche Boerse. But that would prove more difficult than expected. European regulators took a critical view of the size of the resulting firm, especially in Europe. Many market participants, including Nasdaq, argued against the deal to European regulators. They were going to have a 90 percent market share in the derivatives clearing business in Europe, raising antitrust issues and competitive concerns for our own much smaller derivatives clearing business in the Nordics. The review process dragged on over the summer and into the fall, and by early 2012 the merger looked increasing unlikely. By February it was dead. On the mergers-and-acquisitions front, it was a year of much ado, and nothing came of it in the end.
Well, almost nothing. The postscript to our “almost merger” was an actual acquisition—but Nasdaq wasn’t involved. On December 20, 2012, our former partner ICE announced its own plan to acquire NYSE Euronext, and the bid was successful. For the first time in its 220-year history, NYSE was no longer an independent organization. That’s what a decade of failed leadership will get you in the world of business, even for an institution like NYSE. ICE wasn’t in the equity business, so they had none of the antitrust issues that Nasdaq had. It was clear sailing from a regulatory point of view. From my perspective, management and the Board failed to recognize the true value of NYSE. It was a miscarriage of their responsibility to shareholders.
From my office down the street at One Liberty Plaza, the merger was admittedly hard to watch. It was a fantastic deal for ICE. In the press release announcing the deal, Sprecher noted that there were “massive amounts of synergies that we can realize in two years.” And I couldn’t help but think to myself, who showed him those synergies? After the ICE acquisition was approved, Sprecher (along with eventual CEO Tom Farley) went into their operation with a knife and a scalpel and cleaned up the place. He cut, he streamlined, and in the end, he probably took more than half a billion dollars in costs out of their operations. One of my great regrets in life was not being able to do that myself—to really straighten that place out. I have real respect for what Sprecher’s done with NYSE. I just wish I could have been part of it.
The End of an Era
In the midst of all this high drama, Nasdaq (and I) suffered another difficult loss. During that period, I happened to be visiting our Rockville, Maryland, office, where Adena officially worked and lived, although in reality she traveled extensively and spent a great deal of time in New York.
One afternoon, I dropped by Adena’s office to say hello. She invited me in, and as I closed the door, she gave me a somber look. “Please, have a seat. We need to talk.” For some reason, I knew immediately what she was going to say.
“Bob, I’ve been thinking,” she began. “I’ve decided it’s time for me to leave Nasdaq. I want to spend more time in DC with my family. And I also feel it’s the right time to try something new. I have an offer from Carlyle Group, here in DC, to be CFO. They’re going to go public and I can lead them through that process.”
Adena had spent her whole career at Nasdaq. Sometimes it seemed she was born and bred in the exchange; I think she probably bled Nasdaq blue. Over the years, I had watched her mature into a remarkable executive and had relied on her support, counsel, and extraordinary work ethic. She had been a valued partner in so many aspects of the business and, in particular, during the many acquisitions (and attempted acquisitions) we had made in the previous years. I did not like to imagine Nasdaq without Adena.
As I sat across from my powerhouse protégé that day, I told her, “Look, I hate to see you go. But I understand. It’s good for you to be here with your family and spend more time with your children while they’re still at home. The Carlyle opportunity sounds great. Taking them public will be an adventure.”
Carlyle Group is one of the biggest alternative asset management firms in the world, based in DC. It was filled with master-of-the-universe types, many of whom ran their own funds and portfolios almost like fiefdoms. The challenge of herding all of those cats to get them in shape to go public was a perfect fit for Adena’s talents. She could also work directly with cofounders David Rubenstein, Bill Conway, and Dan D’Aniello, a valuable opportunity. But I also knew that once Carlyle went public, the dynamics of the job would quickly change. Indeed, being CFO at a firm like Carlyle—which is a collection of funds, where most of the operations and real business decisions are made in the subsidiaries—wouldn’t be the most stimulating venture. Adena was an operations executive who liked to be involved with everything. Could she really be happy in the long run at Carlyle, which was essentially a nonoperating company?
Losing Adena was not easy. But that’s part of being a CEO. Inevitably, you’re going to lose good people; you have to lick your wounds and soldier on. No one is indispensable. Nasdaq had also parted ways with Chris Concannon a couple of years previously, when he left to be COO of Virtu Financial. Now Adena was leaving, too. I knew how much she did, how many gaps she covered. As one of her direct reports once told me, “I need to get this work done quickly or Adena will just finish it for me!” I wasn’t looking forward to Nasdaq
minus her substantial footprint.
Still, I knew it would be good for Adena to get outside of Nasdaq and spread her wings in a different context, and I wanted her to know she had my blessing. Privately, however, I thought, She’ll be back. She’ll come home. No one knew the future then, but I did think that she would make a great CEO candidate—for someone, someday. Perhaps it would be Nasdaq.
LEADERSHIP LESSONS
• A Public Company Is Always for Sale. If it’s being run inefficiently, sooner or later someone is going to take notice and realize they could do a better job.
• Occasional Failure Is the Price of Big Dreams. In business, as in life, when you dare to reach high, some disappointments are inevitable.
• Let People Go with Grace. If you cultivate real leaders, it’s likely that a certain percentage of them will move on. It’s not a failure; it’s a sign that others recognize your success. Be gracious and supportive—you never know how your paths will cross again.
Chapter Eleven
The Facebook Fiasco
Facebook IPO: What the %$#! Happened?
CNN Money, May 23, 2012
One picture captured the moment: Robert Greifeld, CEO of Nasdaq, fist raised in the air, standing next to one of the great technology icons of our time, reveling in the celebration. This picture would come back to haunt me, but for a brief period, just after sunrise on May 18, 2012, I enjoyed the glow of unqualified success. It was a crowning accomplishment in a decade of Nasdaq’s relentless resurgence. By any measure, it was one of the stock exchange’s most important moments—shepherding to market one of the largest IPOs in history: Facebook.
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