Another priority in the Ackman household was financial independence. Although he ran a successful commercial real estate finance brokerage business, Larry Ackman never wanted his children to take money for granted. That meant no allowances for the kids. Bill dug ditches, shovelled driveways and waxed cars. “My dad thought I wouldn’t understand the value of money unless I earned it myself,” he says.
By the time Bill Ackman followed in his father’s footsteps at Harvard, athletic competition and business ambition were one and the same: When Bill rowed crew on the Harvard Business School team, they had dollar signs painted on their oars.
After graduating from Harvard with an MBA in 1992, and after short stints working for his dad and at a couple other places, Ackman knew two things: He did not want to work for the family business, and he did not want to report to anyone else. He wasn’t cut out to take orders, and he detested seeing superiors take credit for his work. What he did like was the stock market. In his spare time at Harvard, he had displayed a flair for investing, betting on blue-chip bank stocks excessively punished by real estate loan-loss fears.
Realizing “investing was what I loved,” Ackman staked his future on an investment model just then sweeping Wall Street: hedge funds. In its simplest form, a hedge fund matches professional investors with wealthy individuals or institutions. The wealthy pour cash into a private fund, and investment managers make bets on stocks, bonds, currencies and commodities, typically earning a 20 per cent cut of profits. By 1998, hedge fund managers were taking home such enormous paycheques that Fortune magazine observed, “Almost anyone with a brain is fleeing Wall Street to start a hedge fund.”
Ackman carved out his own niche by chance. One year after he and fellow Harvard grad David Berkowitz founded Gotham Partners in 1992, he acquired a minority stake in a public company whose core asset was a $1.3-billion mortgage on New York’s iconic Rockefeller Center. Ackman hoped to parlay the investment into a small stake in the landmark property. Instead, he emerged as the champion of the struggling mortgage lender’s shareholders, who were fending off lowball takeover offers. To spark a richer bid, Ackman “visited a lot of billionaires” to enlist their support. The result was a two-year odyssey of counteroffers and bankruptcy proceedings that concluded with a winning offer from a syndicate led by Goldman Sachs that more than doubled the takeover offer for the lender. By the time the restructuring was finished, Gotham Partners had earned more than a 60 per cent profit on its initial investment, and Ackman was hooked on fixing broken companies. “You can create a lot of value if you step in and affect the outcome,” he says. “It is consistent with my personality. I was never a passive person. I don’t like things happening to me that are outside of my control.”
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It was November, 2011, when Ackman first met with CP’s CEO, Fred Green, and chairman John Cleghorn, during a stopover at Montreal’s airport. When he left the meeting, Ackman was convinced the pair would bow to his demand for two seats on the railway’s board and to replace Green with Hunter Harrison, the former chief of CP’s archenemy, Canadian National Railway.
Indeed, according to Ackman’s account, Cleghorn appeared so eager to accommodate the activist that he waved down Ackman’s jet as it was readying for takeoff to suggest that Green was willing to step down.
Cleghorn denies he made any such suggestions, one of several “communication issues” Ackman says poisoned talks with the railway’s board and led to the proxy showdown—just the third one Ackman has faced since launching Pershing in 2003, out of 24 companies targeted. The first, with U.S. payroll giant Ceridian Corp., he won, taking four seats on the board. Then, in 2009, he attempted to elect a dissident slate to the board of U.S. retailer Target Corp. After being voted down by shareholders, Ackman—who seldom preps for a presentation—shed tears as he delivered a rambling speech channelling JFK’s inaugural address against tyranny: “We will pay any price, bear any burden, meet any hardship.”
Three years later, the Target pratfall has been reduced to a rounding error; Pershing, Ackman says, has recovered most of its drastic paper losses on a complex investment that included stock options. As for his emotional performance, he dismisses it as a delayed reaction to his gruelling seven-year fight against MBIA Inc., a play that eventually earned him a $150-million profit (which he later donated to a family foundation) and a part in the Oscar-winning documentary about the financial meltdown, Inside Job.