Frank Quattrone: Lessons from 650 M&A Deals Worth Over $1TRN & Taking Amazon and Cisco Public| E1121

You're the OG of M&A. (laughs) Has regulation killed M&A?

I don't think it's killed it. It's more of a granular filter. What you need are great companies to come public, and you need them to be willing to come public at reasonable prices. I think that we're in a phase where things are coming back in M&A. We've had two consecutive down years, but for the last six months, our business started picking up. When interest rates are stabilizing, I think we're gonna be on a cusp of M&A activity increasing.

Has the way in which you do deals changed?

You know, I really don't think so. But the hardest part was-

Frank, I am so excited for this. When I was thinking of this topic, there was no one that I would rather have do this. And there's so many mutual friends that I've heard so many good things about. So thank you so much for joining me today.

It's a great pleasure. I've heard wonderful things about your podcast, and I'm really looking forward to our conversation, Harry.

Well, I pay a lot of money for such good reviews, but I do want to start way back.

(laughs)

Because I heard that meeting Steve Jobs at a Stanford investment class was the inspiration for your career in investment banking. Can you just take me to that and what that was?

I'll go back just a little bit in time before that, but, um, yeah, I was, uh, I- I'm from a blue-collar neighborhood of Philadelphia, South Philly. My dad worked in a clothing factory, and I was very fortunate to get a scholarship to attend the University of Pennsylvania's Wharton School. And after Wharton, I joined a privately held company that I'd never heard of before called Morgan Stanley in New York. They had a two-year program for people like me who wanted to work for two years, and then they kicked us out, and you had to get an MBA if you, um, if you wanted to continue with the firm. So, uh, when I was in New York, I mean, I- I enjoyed the work, but I didn't really find any passion. So I get to Stanford, and, uh, luckily I, um, got a job as a teaching assistant to Jack McDonald, who is literally the most revered, um, professor there. People would basically use up all of their points to try to get into his class. So I took his, uh... Well, the first thing was, he said, "Frank, um, he- welcome to Stanford." This is 1979. Um, "Your first job is, I want you to go down to this little privately held computer company in Cupertino called Apple. You've probably never heard of it. Uh, they make personal computers." I hadn't heard of what those were. Uh, and he said, "I- I've just bought an Apple II. Could you go down to, uh, to Apple, pick it up, bring it back here to Stanford, and I want you to transport the software program that does investment analysis that's currently working on the minicomputer in our labs to work on this new personal computer?" I said, "Okay." I had done a little bit of computer programming work at Stampf- at, uh, Wharton. And, um, so I- I went down there, and I saw this group of young people. I didn't see any offices. I saw a lot of jeans and beards and, you know, uh, it didn't look like a traditional company, but you could feel the energy. And I was like... I grabbed the computer. I brought it back. When I opened up the box, it had a tiny manila, or a- a very large manila-colored, uh, keyboard in which the single circuit board of the computer's intelligence was embedded. And it had a tiny little terminal, and when you turned it on, it was a green screen with a C prompt, uh, just like a minicomputer, uh, or a mainframe. And so... And then, it had a user's manual. That's it. It had three pieces, the keyboard, the terminal, and the user manual. There were no, um, applications available for it yet, although some were on the horizon. So if you wanted this hunk of iron to do something useful, you actually had to program it. So I had to learn, uh, micro- uh, BASIC for the microcomputer. Um, and I did the port, and it turned out successfully, and I figured, "Ah, it's just a small minicomputer, no big deal." So roll the clock forward a year later, I'm in the same professor's class, Investments, uh, with Jack McDonald, and right around that time, Apple had filed for its initial public offering, but it hadn't yet priced it. And so Jack gave us the job, our classroom, of pricing Apple's IPO before the underwriters did. And as an added inducement, he brought in the 25-year-old Steve Jobs into our classroom. I was 25. I thought I was kind of a hotshot, you know, after all, Wharton and- uh, undergrad and Morgan Stanley, you know, two years on Wall Street, and now I'm about to get my Stanford MBA. And then I meet another 25-year-old guy who really has a tiger by the tail. And, uh, he tells us the story of how he and his partner Wozniak had come up with the idea for a single board computer that could be on everybody's desktop and everybody's- in everybody's home, and how they had no idea how to do a business around it. But they tried to take it to Hewlett-Packard, to Digital Equipment, to Tektronics. No one was interested. So he told us that day he finally had to sell his Volkswagen van for $800 for working capital to get Apple Computer started. And, um, then the really interesting part happened. He said, "Personal computers are not just going to revolutionize the computing industry, but how we communicate, how we shop, how we entertain ourselves, and how we live." And I said, "Wow, I don't know what that guy is smoking, but I really want some of it." (laughs) And the, uh, the even more interesting part is that Morgan Stanley, the blue-chip firm that I had worked on, on- worked at at Wall Street, um, who was the banker to AT&T and General Motors and General Electric, uh, they had never really done a high-tech IPO before, but they were the lead manager of Apple's IPO. They had also just opened up a San Francisco office. And, you know, one of the great things my dear old dad, uh, God rest his soul, told me, uh, because he had failed to follow this advice, he said, "Son, if you ever get a chance to get in on the ground floor of something new, uh, you should really jump at it." And so, uh, the Morgan Stanley people were trying to recruit me back to New York.... to work in the M&A department, ironically, since that's, we'll, all we do at Catalyst. But I didn't really want to do that. And I had had my eyes opened and, uh, the scales fell out of my eyes, and I had seen the future, and it was Silicon Valley and, and Apple and companies like that, and venture capital and all the things that were surrounding this risk-taking, uh, phenomenon. And I told them, "No, no, no, I, I thank you. I'd love to rejoin you, but I, what I really want to do is go into your new San Francisco office," which I believe had zero revenues that year, "and work with these cool companies like Apple, taking them public." I think that's the future. That... I really identify with that, like, giving birth instead of going end of life with mergers. You know, that's kind of...