Divine messenger and god of commerce and trade, closest planet to the sun and quicksilver metal. The investment firm Mercury, at one time one of the biggest names in European asset management, shared characteristics of sublimity, overheating and capriciousness with its namesakes. In 2001 it was almost brought to its knees by a negligence lawsuit, mass defections of star managers and an exodus of clients.
Just three years after Merrill Lynch bought Mercury Asset Management for £3.1bn, or £17 a share in 1997, the investment business that grew out of SG Warburg in the 1960s and floated on the London stock market in 1987 for 90p a share, was heading for ruin.
Poor performance struck, Mercury fought and then settled a lawsuit by its client Unilever, 40% of the 200 Mercury managers who had been made millionaires in the Merrill takeover had left, and half its business walked out of the door. When co-heads Carol Galley and Stephen Zimmerman stepped down, few thought it would recover.
But after another three years it had done just that, and in 2006, BlackRock issued shares worth £9.3bn to acquire Mercury and the rest of the Merrill Lynch Investment Managers business – doubling its assets under management in the process.
Former Mercury chief operating officer in Europe, Rob Fairbairn, now head of global clients at BlackRock, said Mercury’s expertise in operations and recruitment proved the doubters wrong. “We survived an ordeal which would have wrecked other firms. BlackRock runs a different business now – broader and risk-aware – but there are similarities with Mercury,” he said.
Rigorous hiring process
Peter Stormonth Darling chaired Mercury between 1979 and 1992 and wrote City Cinderella: The Life And Times of Mercury Asset Management. He said: “The key to Mercury was its people. And the key to that was a disciplined recruitment process, involving multiple interviews.”
There was also a common trait in the type of people hired, according to former UK equity manager Charlie Curtis: “We knew we had an edge. We were edgy people as well.”
Fierce loyalties developed. Curtis quit Mercury along with co-managers Nicola Horlick and James Goulding, when Leonard Licht, the head of the specialist equities team and MAM vice-chairman, joined Jupiter. The exodus “opened up something of a gap”, said Stormonth Darling.
But Mercury filled it thanks to its skill in finding and developing talent from a range of universities and disciplines. Casting the net wide also gave Mercury an edge over rival managers who preferred male economics graduates from Oxford or Cambridge.
As well as women, Mercury was alive to hiring executives with a military background, tapping into their organisational skill and readiness to look out for others. Stormonth Darling himself fought as an infantry officer in the Korean War.
It was aggressively meritocratic. Its executives carefully ranked potential recruits in interviews, rating conviction highly.
Once appointed, graduates were expected to spend two years in the back office. Galley started her career in the library. Mercury did not like rookies to take short cuts.
Leadership
Managers say Zimmerman and Galley were intolerant of stupidity but backed conviction to the hilt.
“They made us jump,” said one former colleague, who added that they often backed down when it looked like they would lose an argument. Zimmerman and Galley made all the key decisions on pay but were generous to their favoured managers.
They pushed for Mercury to be floated 25 years ago, when they realised everyone (themselves included) deserved equity incentives. According to one former colleague: “There was a kind of restrained greed at the top of the business, which worked its way down.”
Individual performances were mapped internally and closely analysed. Managers competed against each other, seeking to access companies and brokers at the highest possible level and the fastest speed.
Business and investment strategies were dominated in the early years by Andrew Smithers, whose level of self-belief was only equalled by his faith in Mercury.
Similar levels of conviction trickled through the firm by the 1980s, often to the benefit of performance.
The firm liked big bets.
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