Gerhson Kekst, M&A PR Luminary, Says Credit Crunch Worst in 40 Years

Some readers may think I am unduly fond of negative forecasts to be featuring the views of a mere PR maven, one Gershon Kekst, along with those of famous investors like Jim Rogers, Marc Faber, and George Soros.

Ah, but there is a reason Kekst’s views are significant. Very few advisors, be they top lawyers or M&A advisors, stay preeminent for more than one M&A bull market. Multiple cycles is virtually unheard of. Who besides Felix Rohatyn also advised Harold Geneen and is still sought after?

What is most important is that Kekst is a flack. His raison d’etre is to put lipstick on pigs. And not just any pigs, mind you, but the biggest, ugliest, most diseased representatives of their species.

So for a guy like Kekst to come out and say things are dreadful means that it is common knowledge in the circles he travels in. There is only downside to him in being ahead of the curve in presenting bad news.

From Bloomberg:

Gershon Kekst, who pioneered the field of public relations for dealmakers as an adviser to Henry Kravis and Sanford Weill, said the current credit-market contraction is the most “frightening” slump in four decades.

“This is more severe and more intense, and if I had to use one word to characterize it, in contrast to the 80’s, it would probably be frightening,” Kekst, 73, said in an interview. “We just don’t know what’s going to happen. The economy is being tested in a bear market that could go for a long time.”

Kekst and his New York-based company have counseled business chiefs from Kravis, the co-founder of Kohlberg Kravis Roberts & Co., and Weill, the former chief executive officer of Citigroup Inc., to Steven Ross, the former chairman of Time Warner Inc. These days, Kekst & Co. is helping Anheuser-Busch Cos., led by CEO August Busch IV, defend against a $46.3 billion takeover bid from InBev NV, the Belgian brewer.

Kekst, who agreed to sell his firm to Publicis Groupe SA last week for an undisclosed price, has had a front-row seat in four M&A booms and the busts. He worked through the merger wave of the 1960’s, led by conglomerates such as Textron and ITT; the 1980’s takeovers fueled by high-yield, high-risk bonds from Drexel Burnham Lambert; the Internet and technology mergers of the 90’s; and last year’s record private-equity buyouts….

As corporate takeovers dropped, Kekst says his company managed to increase revenue this year by picking up work for chief executives and boards on matters from bankruptcies and lawsuits to shareholder activism. His non-deal assignments now eclipse fees from the cyclical M&A market, which once made up more than 90 percent of Kekst’s income.

Kekst & Co. is still best known for advising on takeovers, competing against firms including Abernathy MacGregor Group Inc., Brunswick Group Inc., Joele Frank, Wilkinson Brimmer Katcher, and Sard Verbinnen & Co. Kekst says it worked on more M&A transactions than any of its rivals in each of the past five years, citing data from mergermarket.com.

“Gershon gets the top brass to listen to him,” said Joseph Flom, 84, the takeover lawyer at Skadden, Arps, Slate Meagher & Flom in New York. “He’s the first choice of many CEOs.”…

The terms of Kekst & Co.’s sale to Paris-based Publicis, the owner of the Saatchi & Saatchi and Leo Burnett advertising agencies, weren’t disclosed. A corporate parent gives Kekst & Co. the opportunity to expand outside of the U.S., either piecemeal or through acquisitions, Kekst said. He said he’ll continue to lead the 70-employee company, and didn’t say how long he’ll remain in the post.

He said he once asked his friend Flom whether Kekst & Co. would be crippled if mergers and acquisitions dried up.

“You’re not in the M&A business, you are in the `seykhl’ business,” Flom replied, using a Yiddish word meaning “street smarts.” “Business leadership is going to find issues and problems to get themselves into long after the M&A business is gone.”