Donaldson Lufkin and Jenrette Case Study

DLJ was founded in 1959 by William Donaldson, Dan Lufkin, and Richard Jenrette, which whom set out with $100,000 to create an equity research firm that would serve institutional shareholders. The firm went public in 1970 after gradually increasing the services provided to clients and diversifying in the face of competition. DLJ was a member of NYSE and retained their membership by offering shares of itself to the public. DLJ sold itself to Equitable in 1985, after facing capital requirements. Equitable was a mutual life insurance company, owned by policyholders. Jenrette joined Equitable as chief investment officer, and he later became chairman of the company in 1990. He initiated a restructuring of Equitable in response to serious problems. This involved cutting $150 million in annual costs and selling 49% of Equitable to AXA, a French holding company. He demutualized Equitable, raising $450 in an initial public offering. By 1995, AXA owned approximately 60% of Equitable.
DLJ’s strategy was one of patience and involved focusing on building higher margin businesses such as underwriting IPOs and high yield debt, creating specialized issues of mortgage-backed debt and merchant banking, and striving to be a leader in each market it selected. DLJ is ranked as the 11th largest securities firm serving institutional, corporate, government, and individual clients as a leading investment and merchant bank. Its’ businesses included securities underwriting, sales and trading, merchant banking, venture capital, financial advisory services, investment research, correspondent brokerage services, and asset management. It operated through Banking Group, Capital Markets Group, and a Financial Services Group.
The Banking Group assisted in clients in raising capital through the issuance of debt and equity securities in the public and private markets. It was believed to have a competitive advantage focusing on 17 sectors in the industry. The Merchant Banking group