Lazards clings to its glory years as vultures circle in the City

Last great finance dynasty faces a corporate world that has turned its back on old-style values

There is a sense of fin d'empire hanging around Lazards, one of the last of the great dynastic corporate finance houses left.

There is a sense of fin d'empire hanging around Lazards, one of the last of the great dynastic corporate finance houses left.

Rumours circulating in the City for over a month that the firm was in takeover talks with the mighty Deutsche Bank were comprehensively denied when they were finally picked up by the weekend press on Sunday. But the fact that the idea could be taken even half-seriously shows how ready the City is to write Lazards off as a serious force.

Never, say critics, has the 150-year-old firm's claim that it has a promising future as an independent house looked as fragile as it does today. David Verey, head of Lazards in London, not surprisingly disagrees: "We believe remaining independent and not using capital is the right thing to do. The fact it does not fit in with other people's view of how the business should work is tough luck."

Ten years ago the Lazard firms dominated the global mergers and acquisitions business. Whenever there was a deal to be done, characters like Felix Rohatyn in New York, Antoine Bernheim in Paris and in London, the trio of Marcus Agius, Nicholas Jones, and John Nelson were the first port of call for any serious CEO. Mr Rohatyn is now American ambassador to France, Mr Nelson is at Credit Suisse First Boston, the Swiss-American investment bank, and Mr Bernheim has fallen out with Michel David-Weill, the ageing French dynast who controls the decaying Lazard empire and is believed to be helping Vincent Bolloré, a flamboyant French corporate raider who is banging on Lazards' gates.

The new generation of rainmakers who should have emerged to replace them have yet to come to the fore. Meanwhile, Lazards seems to be losing ground to the integrated US firms who have the capital and manpower that Lazards, which pays out virtually all its profits to its partners, cannot muster. The latest Thomson M&A advisory tables show Lazards languishing in 7th place in Europe and 11th worldwide.

Mr Verey maintains a recent survey showed Lazards had actually improved its position in the pecking order since 1990. But in the City perception is often more important than fact.

Attempts to halt the slide by unifying the firm's French, British and American arms have done little to halt the flow of top talent seeking jobs elsewhere. On Monday, David Anderson quit Lazards after 17 years to join Vodafone, the cellular phone giant, as finance director. Last week, David Dautresme, co-head of mergers, announced he was to retire, while Pierre Tattevin, another key member of the Paris team, has gone to join Rothschilds, the rival investment bank.

As if that were not enough, UBS Warburg, the rival investment bank, is trying to take advantage of the disarray to force Azeo - one of the cascade of holding companies through which Michel David-Weill has traditionally controlled the firm - to restructure. UBS says it has no interest in taking over Lazards and merely wants Mr David-Weill to unlock the value of its disparate holdings for the benefit of minority shareholders. But Lazards needs this fight like a hole in the head.

Mr David-Weill, 67, a Cuban-cigar-chomping renaissance man who sits on the acquisitions committee of the Louvre and the Metropolitan Art Museum in New York, has responded to the criticism with characteristic hauteur.

Lazards is a firm that has never believed in discussing its affairs in public, and it is not in a hurry to start now. But increasingly even insiders are starting to see him as the ultimate source of the firm's difficulties.

His refusal to delegate hasalienated every likely successor, among them star New York dealmaker Steven Rattner and Edouard Stern, his son-in-law, who left on such bad terms that he and Mr David-Weill nearly ended up slugging it out in the courts. Last year he set up a seven-man team supposedly to deliberate on who his successor should be, but there is is little evidence of any real desire to loosen the reins.

Former Lazard partners watch what is going on at their old firm with increasing anguish: "This industry has gone in 10 years from a cottage industry, which it was in 1990 when Lazard dominated the world M&A business, to a global industry. You have to manage that, not manipulate," said one.

Ten years ago the stakes Michel David-Weill and his allies owned - indirect stakes in key corporate players like Danone in France and Italy's Generali - guaranteed a steady flow of corporate business. But that is not how the world works any more.

Mediobanca, the Milanese bank that has long pulled the corporate strings in Italy, engineered a coup last year which ejected Antoine Bernheim, Mr David-Weill's long-standing ally, from the chairmanship of Generali, its main Italian powerbase. Mediobanca is now said to be plotting to take over Lazards with the help of Gerardo Braggiotti, who quit Mediobanca for Lazards in 1998 and is now part of this college of cardinals which is meant to be the running the firm.

The story about Mediobanca may be true. No one really knows. But this Machiavellian intrigue is not helping the firm. Increasingly, corporate movers and shakers in Europe as well as in the US are embarrassed by the old-world values Lazards exudes. They want the glitz and aura of professionalism that Goldman Sachs or Morgan Stanley profess to bring.

But the message does not seem to be getting through. "They are all too wet," complained one banker yesterday. "They leave rather than have a revolt."