Monday, March 30, 2009

Byron Trott Leaving Goldman

The TARP exodus continues. The latest departure, according to the WSJ, is GS advisor Byron Trott, who is departing the Masters of the Universe and will start his own merchant banking firm focusing on family-controlled and entrepreneurial companies. Trott used to be Goldman's vice-chairman of Investment Banking and ran the company's Chicago office. Among Trott's more reputable advisory clients is Warren Buffett himself. In fact, the WSJ ran a column on Trott in March 2008 called "The Only Banker Warren Buffet Likes."

Is Goldman Sachs Group’s Byron Trott better than an investment banker?

Warren Buffett seems to think so. You see Buffett famously disdains investment bankers. He even boasts in his latest letter to investors of how his Berkshire Hathaway did its largest cash purchase in the company’s history—the $4.5 billion acquisition of a majority of Marmon Holdings from Chicago’s Pritzker family—while “employing no advisors” and that the price was arrived at “using only Marmon’s financial statements…no nit-picking.”

But that “no advisors” is open to interpretation, as Buffett singles out the participation in the deal of Trott, vice chairman of investment banking and the head of Goldman’s Chicago office and its Midwest banking group. While Trott technically was the Pritzkers’ adviser, Buffett relies on him as well: “Byron Trott of Goldman Sachs–whose praises I sang in the 2003 report–facilitated the Marmon transaction. Byron is the rare investment banker who puts himself in his client’s shoes. Charlie and I trust him completely,” referring to Berkshire Vice Chairman Charlie Munger. In 2003, Buffett admitted that Trott “earns his fee.”

It will be interesting to see if Goldman allows Trott to bring over Buffett as his client to his new venture, where Trott will continue to earn his fee from the richest man in the world (at least until BRK has to post collateral on all those written future puts).

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