In 1982 a young Steve Schwarzman, who at the time was an investment banker that chaired Lehman Brothers’s M&A committee, was advising CSX Corporation on the sale of two daily newspapers. Initial bids were submitted by three bidders.
- Morris Communications $200 Million
- Cox Communications $135 Million
- Gannet Company $100 Million
In response, the client, CSX Corporation, was eager to move forward with Morris Communications, but Schwarzman advised his client to wait. Rather than reveal the bids to encourage Cox and Gannet to match or surpass Morris, he kept the sums concealed and organized a second round of sealed bids.
The objective was to convince Morris that the offers received were tightly grouped. Believing that the competition was tight Morris Communications raised their bid to $215 Million.
“Steve had a God-given ability to look at a transaction and make something out of it that others of us would miss.”
Warren Hellman, President, Lehman Brothers
Today a “sealed-bid auction” is common, but at the time it was largely unheard of. “‘We made it up as we went along,’ says Schwarzman, who credits himself with pioneering the idea.”