Michael Tory went to bed on Sept. 14, 2008, with a feeling of dread. For months, the Canadian banker had feared that his employer, Lehman Brothers, was on a Titanic run and could go propellers up at any moment. But as Lehman’s head of U.K. investment banking, quitting was hardly an option. Senior executives were expected to rally their employees and do everything they could to keep the Wall Street giant afloat.
At dawn, London time, the next day – a Monday – Lehman declared bankruptcy and Mr. Tory, now 51, found himself out of a job and almost out of money. When he left Morgan Stanley in 2005 to join Lehman, he rolled all of his Morgan Stanley stock into Lehman stock. “It went up in smoke that day,” he says. “It was a material sum.”
Many executives would have been despondent or enraged about the vaporization of a fortune accumulated over the better part of a high-paying career. Not Mr. Tory, who did a quick inventory of his life as the financial crisis started to eat Wall Street alive. “How did I feel? I woke up that Monday morning and I had my health, my family, my reputation and energy,” he says. “I had lost nothing, really. It was a profound revelation to me. I had lost nothing important and, that day, I decided to start my own company.”
Within a month, Mr. Tory had launched a firm called Quattro Partners, since recast as Ondra Partners, which he tailored to the harsh new reality of the post-Lehman world. It would be a pure advisory firm, making it rare, perhaps unique, in London’s cluttered investment banking industry, where the transaction – and the typically fat fee that goes with it – utterly dominates the business model. In the deliciously brutal argot of the street, this is known as “eat what you kill.”
Ondra would make advice its only activity; the firm’s livelihood would not depend on transactions such as debt underwritings or success fees on mergers and acquisitions. It would only take on clients who would pay retainers to cover Ondra’s running costs, with any discretionary transaction-related fees adding to profit.
None of the partners would get stinking rich, but, equally, they would not have to act as shills, eternally pushing services or products because they paid jackpot returns, not necessarily because they were in the best interests of the client.
The goal was to eliminate conflicts of interests, real and potential, and build a reputation as a truly independent, client-focused shop. “If you need a deal to happen to get paid, then you by definition undermine the very thing you try to do, which is tell someone what the right course of action is,” he says. “So we did something that no one else had done. We will not pick up a pen unless someone pays us a retainer.”
After a slow burn, it seems to have worked. Ondra is becoming a player in the City, as London’s financial district is known. Its name is popping up regularly in the financial press and its clients are getting bigger. They include GDF Suez, Prudential, Société Générale and National Grid.
In October, Ondra played a role in the collapse of the proposed £28-billion ($45.5-billion) merger of BAE Systems, Britain’s main defence company, and EADS, the European defence and aerospace colossus that owns Airbus. Working for Invesco Perpetual, the biggest shareholder of BAE, Ondra strongly influenced the Invesco letter, which went public, that concluded the deal was so politically charged that it would in essence make BAE a plaything of the German and French governments.
We are in Ondra’s airy, 23rd-floor offices on Old Broad Street, hard by the Bank of England, where another Canadian, Mark Carney, is about to take up residence as governor. Even though Mr. Tory, who was born in Toronto in 1961 and studied economics and political science at the University of Toronto, has spent most of his career in Britain, he looks and sounds very much the Canadian. With boyish looks, an easy grin, casual dress – green sweater over white shirt, with one button too many undone – he could pass for an enthusiastic junior hockey coach who drives a minivan and flogs insurance for a living.
The looks are deceiving. Mr. Tory is one of Canada’s most successful banking exports, all the more so since Sudbury, Ont.-born Jerry del Missier last summer resigned as Barclays’ chief operating officer, a victim of the Libor rate-setting scandal that also cost the British bank’s CEO, Bob Diamond, his job.
Mr. Tory comes from a rather illustrious Canadian family. His father, the late John Tory Sr., was Ken Thomson’s consigliere at Woodbridge Co. Ltd. of Toronto, the controlling shareholder of The Globe and Mail and Thomson Reuters, the global news and financial data company. His older brother is John Tory Jr., former leader of the Ontario Conservative Party, one-time Toronto mayoral candidate and an ex-boss of Rogers Cable and Rogers Media. His sister, Jennifer Tory, is Royal Bank of Canada’s regional president for Toronto, the bank’s biggest market. Mr. Tory and his wife, Jennifer, who is from Vancouver Island, have four sons, the eldest of whom is a Royal Marine commando.
We are to have lunch in an Ondra meeting room. Given Mr. Tory’s Canadian-style, no-frills approach to business, and that we are in Britain, I half expect mayonnaise-laden sandwiches on soggy white bread, or similar. Instead, Mr. Tory has hired a chef, Chris Edwards of Jus Fine Food, to whip us up a treat.
We start with dainty tarts of smoked haddock and chive Gruyère cheese, followed by pan-fried breast of chicken, infused with sage and marsala, and crushed new potatoes. French beans and honey-glazed carrots round out the meal, with chocolate hazelnut and orange tart for dessert. No wine is offered.
Mr. Tory doesn’t do much eating because he is doing much talking. The lunch evolves into something of a free-for-all as various partners and executives of Ondra (the Basque word for “honour”) stroll in to chat. The first to arrive is Sir William Castell, the new Ondra chairman, and chairman of the Wellcome Trust, one of the world’s biggest medical research funding charities, and a former director of BP. Sir William is a big catch for little Ondra, which has only 50 employees, 11 of whom are partners.
Sir William says he believes the Ondra conflict-free business model has legs because some clients are weary of the hard sell from investment bankers who live and die on success fees. “I have been a client for my years and often observed the pressure bankers were under to deliver transactions,” he says. “It was amazing to see the effort that would go into trying to make a deal look attractive.”
Next up is Benoit d’Angelin, Lehman’s former head of European investment banking and the founding partner largely responsible for Ondra’s French connection; about a third of the employees are French and much of the firm’s business is done with French clients; (the third founding partner, Michael Baldock, formerly with HSBC and Lazard, runs Ondra’s New York office). He, too, thinks the old investment banking model is in need of a serious rethink. “This used to be a service business like law or accounting,” he says. “Basically, in the last two decades, you witnessed this inversion. Instead of financial services serving the client, the client became the playthings for finance.”
To be sure, Ondra is a work in progress and its retainer-based business model is not for everyone; Ondra has virtually no imitators. But so far, the results are impressive. In the year to March 31, pretax profit more than doubled to almost £12-million.
Lunch ends on a bittersweet note. Mr. Tory is obviously no egomaniac. He considers himself more of a team leader than a boss and likes to sprinkle credit everywhere. One man whom Mr. Tory cannot thank enough is his father, John Sr., who died in April, 2011. He was an investor in Ondra and lived long enough to see its early success.
Mr. Tory tears up when he talks about his father. “He was the most important influence in my life and we talked every day,” Mr. Tory says. “He actually came into this very office and attended partners’ meetings,” he says. “He was able to see Ondra out of the incubator. He took great pride in that.”