Chapter I
About John Lª±ThorntonJohn Thornton was born in New York of the United States. When he was fourteen, he enrolled in Hotchkiss, an allª²boy boarding school, whose students mainly came from wealthy families. Hotchkiss was also a school that pays great attention to the cultivation of its students¬ð character. During this period when John Thornton was in Hotchkiss, he not only made remarkable achievement in academic area, but had very good performance in sports £­ he held a concurrent position as the captain of both school basketball team and tennis team. Therefore, since the day John Thornton entered into the school gate of Hotchkiss, he displayed certain quality that is doomed to distinguish him from his ancestors. Brought up in such a family that most of its family members were lawyers, Thornton should have become an excellent barrister as well.
When John Thornton was still in his youth, he spent eight years time to get the bachelor degree of history, master degree of law and master degree of administration study in Harvard University of the United States, Oxford University of Great Britain and Yale University of the United States respectively. Not following his family¬ðs tradition to be a lawyer, he mainly focused his attention on investment and financial field when he was hunting a job at the age of 26. In 1980, John Thornton got a position in Goldman Sachs Corporation that had a history of more than 100 years. Like any other newcomers, he experienced and gradually got rid of all the confusions and discomforts as he first entered into society and became a partner of the company at the age of 34. From a ordinary employee in the merging and acquisition department at the headquarter located in New York to the second most important figure in Goldman Sachs Corporation, Thornton has stayed in the company for 22 years and closely affiliated his personal career with Goldman Sachs.
As the expert on merging and acquisition affairs, Thornton revived the sluggish London market in the 1980s by utilizing some ingenious strategies. Hereafter, he established his reputation and made a great stride toward being a world famous investment banker.
From Operating Independently to Win the First Battle to ¡®Cross the River by Groping for the Stone¡¯
Thornton¬ðs bestª²known contribution to Goldman Sachs Corporation is that he widened the company¬ðs international business. As a matter of fact, Goldman Sachs Corporation to a great extent was still an internal firm nearly without international business at the time when Thornton joined it. But under the leadership and the guidelines of Thornton, the original International Business Sector with only fifty employees at first developed into a major department with more than six thousand employees.
In less than 10 months after he joined the company, he told his superior that he wanted to take charge of a project by himself. Maybe, taking into consideration of his background as a newcomer, his superior only gave him a project with little hope for success. The client of this project is world famous gum product manufacturer who hope to sell out the company at a reasonable price. But in the past two years before they came to contact Goldman Sachs Corporation, Thornton¬ðs client had already negotiated with more than two hundred different firms without success. That¬ðs why Thornton¬ðs superior thought that the project did not have much chance for success.
Having investigated the project, John Thornton found that the 200ª²odd companies his client had contacted were all from the United States. Suddenly, an idea flashed through his mind: why not try the companies outside America. Thus, he chose six foreign companies that he thought might have the intention to purchase his client¬ðs company. Thomas Tilling Corporation was one of them. And the board chairman of this company happened to have the plan to open up American market. He showed great interest in John Thornton¬ðs advice and finally bought his client¬ðs company.
The success of the project enlightened John Thornton. Since then he diverted his attention to British economy as well as the development trend of the whole European economy. So he put forward an application for an opportunity to go to London for the purpose of tapping European market. ¡°When I told my colleagues that I was going to London, they all said I was crazy¡±, recalled John Thornton. He continued, ¡°Actually even I myself was not sure whether European economy had the evidence of revival, or in what speed Europeans would take to reform their economic system, or whether American investment bank would like to go to Britain to set up branch organizations. Moreover, there were not any experiences or lessons I took as a reference in open up British market. All I could do was to cross the river by groping for the stone.¡±
¡®American Model¡¯ Remold London to a Modern City
At the end of 1982, John Thornton moved to London with the plan to provide investmentª²counseling service to European firms and help them to open up American market.
¡®Indeed, nothing is easy at very first¡¯, John Thornton said so when he looked back on the time the situation as he just arrived at London. He recollected that, ¡®at that time, I just worked in the investment bank for less than 3 years. And I still had not had my 29th birthday. You know, it is not easy to be a successful investment consultant at that age¡¯. In order to attract the attention of British enterprises, John Thornton made out two strategies for himself. First, try everything to make himself the investment consultant of the wellª²known enterprises and entrepreneurs in Britain, which enable him to set up his reputation as a successful investment consultant. Second, find those British enterprises whose market value was underestimated by stock market, because it was quite possible that these companies would end up with hostile takeover. Very soon, people could always found this American at the lunch table of the British security bankers. He always came without anyone¬ðs invitation and always came straight to talk about cooperation and business.
Sometimes, you have no choice but believe an old saying: without coincidence there would be no stories.
The very first day when John Thornton just arrived at London, he just got the ¡®gift¡¯ endowed by God. At that time, he just picked up and began to skip that day¬ðs newspaper at hand. Suddenly a news title jumped into his eyes £­ The Hostile Takeover to Thomas Tilling Corporation. This article mentioned that the purchasing price was about ¡ê 630 million, over four times higher than the highest purchasing price (¡ê 150 million) in British history. In terms of this issue, many people held that this acquisition had no chance for success for Thomas Tilling at that time was still an industry tycoon. But John Thornton had different idea. No sooner he saw the report than he called the board chairman of Thomas Tilling Corporation and said, ¡®Maybe I can help you¡¯. Since they had cooperated with each other before, the board chairman invited him to have a faceª²toª²face talk with him. So he came to Thomas Tilling Corporation and analyzed at length for him the situation they were in and emphasized that this hostile takeover was not a small matter. He told the chairman that the hostile takeover had wide chance of success if they did not pay great attention to it.
In the following three days, the security bank employed by Thomas Tilling still did not have any reaction to this issue, just like nothing happened during those days. As a result, Thomas Tilling ceased the contract with that bank and hired Goldman Sachs as the investment consultant.
This hostile takeover did not succeed at last. And due to the big influence of Thomas Tilling, Goldman Sachs also stood out conspicuously in business sphere in Britain. John Thornton summarized, I learned from this experience that British investment bank actually did not had many experiences compared with that of the United States. Furthermore, the financial system reform that had begun in Britain offered Goldman Sachs more opportunity and strengthened my confidence to bring American experience to Britain. On the other hand, it also changed our idea on the means of helping European enterprises to open up American market. On the basis of the original blueprint, we need to help them to improve their investment and ameliorate their management in the domestic market¬ð. Since then, he started his plan to train experts on hostile takeover prevention.
It is true that the market consciousness was not very strong in Britain in the early 1980s. The general feeling was that they are quite ¡®gentleman¡¯ because they just waited their customers to visit them as soon as they sign the contract with them. John Thornton¬ðs ¡®American model¡¯ brought about turmoil in the sphere of British security bank. In 1986, there were altogether five hostile takeovers in Britain, each of which was a deal with a purchasing price beyond ¡ê 1 billion. And Goldman Sachs took part in four of these five hostile takeovers, three of which successfully defeated the hostile takeover. As to the rest one, the actual purchasing price was much higher than the original one. So to some extent, it could also be counted as a successful one.
As early as 1983, Thornton had already started his attempt to establish investment bank and develop franchising business in Europe. In 1985, he moved to settle down in London. Therefore, it could be said that it was almost on the basis of nothing that Thornton established his gigantic merging and acquisition business in Europe and successful opened up a new battlefield for Goldman Sachs. It is by no means an easy project, because the business culture in Europe in the 1980s was still reputed for its conservativeness and selfª²complacence. Even for American, they still had to overcome many handicaps in culture and custom differences.
In 2002 when Thornton, the incumbent Chief Executive Officer of Goldman Sachs and the United Chief Operative Officer left London that he had lived for 15 years and moved back to New York, the Financial Times in Britain even extolled him as a man who ¡®turn London into a modern city¡¯. The a little bit overstated words in fact meant that Thornton undermined the inactive and unprogressive operational mode of the local commercial bank.
Thornton¬ðs success also partly benefited from the privatization process in Great Britain and Germany that began in the 1980s, which provide great opportunities for such investment bank as Goldman Sachs Corporation. The project that Goldman Sachs boasts about in Britain and Germany is BP¬ðs and German Telecom¬ðs listing in stock market respectively. These two super project founded Goldman Sachs¬ð reputation and leading position in Europe. Besides, the incumbent CEO of BP is an intimate friend of Thornton.
Diverting Attention to Asia and Set up Subsidiary in China
Subsequently, Thornton diverted his attention to Asia although he still paid close attention to Europe and played an important role in the decisionª²making of Goldman Sachs¬ð European subsidiaries. At the end of 1996, he was appointed as the Chairman of the Asiaª²Pacific region and stayed on that position for nearly three years. The relationship between Thornton and Asian market can be traced back to 1993 when he was appointed by Li Zekai as consultative advisor in charge of the selling of Star TV. This enabled him to know Asian market and finally promote him to be one of the major policyª²makers on Goldman Sachs Corporation¬ðs Asian strategy.
The performance of Goldman Sachs in Asia is recognized by its Asian counterpart as solid and stable. In China, Goldman Sachs has been invited by many largeª²scale stateª²owned enterprises, such as China Telecom (HK 941, now renamed China Mobile), Petrochina, Bank of China (Hong Kong), to restructure the company and assist them to list in overseas stock market. Among them, the project of China Telecom one was guided by Thornton himself in 1997.
As the international business of Goldman Sachs developed, Thornton also came closer and closer to the peak position in the company. On March 1999, Thornton became the President of Goldman Sachs. On May of the same year, he was appointed as the United Chief Operative Officer. Just like that, Thornton, along with John Thain, another United Chief Operative Officer of Goldman Sachs became the second most important figure in the company who seconded to none but Henry Boson the CEO of Goldman Sachs.
¡®Thornton is a figure with the sharpest international consciousness in investment bank area¡¯, commented Fang Fenglei, the Executive President of Eastª²Asia Industrial Commercial, who had worked with Thornton for many times. While in the eyes of his colleagues, Thornton is a charismatic leader. ¡®Thornton is very smart person. He has such an amazing ability that he could reach the core of the problem in a very short time and bring forward the resolution scheme in a very concise way¡¯, Zhang Lihong, the Vice Board Chairman of German Bank in Asiaª²Pacific Region, and former Chief Representative of Goldman Sachs in Beijing Agency. She added,¡®I think the position that suit him best is the position of American President.¡¯
Saving Vodafone
Many people maintained that one of the reasons why John Thornton could achieve such a big success in Britain was that he spared no efforts to establish personal relations with wellª²known leaders. One of the best examples of this happened in 1988 when John Thornton noticed some special points in a British electronic company called Racal Group.
On the surface, there were nothing special in the Annual Financial Form on the Balance of Revenue and Expenditure. What attracted him was the mobile phone subsidiary in the Balance Form. This was a smallª²scale company whose asset only consists of twenty percent of the total assets of the Group. John Thornton recalled,¡®At that time, some local companies in America were doing mobile phone business as well. And those companies were all suffering losses. However, the market value of several listed companies was overestimated because people at that time still believed that the mobile phone business was doomed to have a bright future. To my surprise, I found that the mobile phone subsidiary affiliated to Racal was making profits. So I concluded that the stock value was in fact underestimated by market, and that it was very possible it would encounter hostile takeover¡¯.
He immediately called the Board Chairman of Racal Group (actually he did not know him at that time). It was his secretary that picked up the phone and helped him record his message. In that afternoon, the Board Chairman called back him. John Thornton told him: We¬ðd better talk this matter face to face, but by the phone because of its importance and sensibility. So they arranged to meet in a hotel where John Thornton told the Board Chairman his analysis and offered him a solution. That is to take out of twenty percent of the Group¬ðs stock to let them fluctuate separately as a way to show the market value of the mobile phone subsidiary. Then, John Thornton provided the formal report to Racal at their request. The next day, Racal Group implemented the strategy under the advice of John Thornton.
Today, there does not exist such a company as Racal Group. But that mobile phone subsidiary evolves into Vodafone, a business tycoon in Britain. And Goldman Sachs also develops into a leading magnate in investment bank sphere.
After doing so many years¬ð business activities in Europe, John Thornton found some similarities between Asia and Europe. He realized that Asia, especially China had great potential for further development. In 1994, he asked the Board Chairman of Goldman Sachs whether he could move to Shanghai or not. But he rebuffed Thornton¬ðs request because in his opinion Thornton could have a better career than in Asia. But Thornton did not lower his interest and attention to Asia. During this time, he acted as a consultant to assist Li Zekai in selling Star TV to Murdoch, the global media tycoon.
In fact, Murdoch did not have much interest in purchasing Star TV. And the experts involved also considered that there was little chance for success because Star TV at that time was still suffering losses. When John Thornton met Murdoch in Los Angeles and London, he seldom touched upon the details on the operation of Star TV. On the contrary, he talked a lot on the economic development and the market potential of China. At last, Murdoch agreed to purchase Star TV at the price of $ 1 billion. John Thornton and Murdoch becomes very good friend since then. Later Murdoch¬ðs BskyB¬ðs listing in Britain was completed by John Thornton as well.
Mr. Thornton arrived at China for the first time in 1993 and worked there for one year¬ðs time. During this period, he developed great interest in China. And five years before when he was still the Chairman of Goldman Sachs in Asiaª²Pacific region, now 49 ª²yearsª²old John Thornton had already established close communications with many sectors and enterprises in China.
In 2003 when he was the frontª²runner in taking over Henry Boson to be the CEO of Goldman Sachs, he suddenly declared he would resign and accept the appointment of Tsinghua University as a guest professor there, which meant that he had to journey to and fro from Beijing and his home in New York.