Dillon Read & Co. history
An investment banking house founded by William Read in 1905. Its predecessor, Vermilye & Co., was founded in 1832. Over the years, Vermilye developed as a conservative bond house, and when Read joined in 1886, he specialized in fixed income securities, mainly bonds and preferred stocks. He helped develop many early bond valuation techniques that later became standard calculations on Wall Street. When Vermilye dissolved, Read founded his own firm that continued to specialize in bonds.
Read remained a small, specialized securities firm until 1913, when Clarence Dillon joined the firm. Beginning as a bond salesman, Dillon soon helped revamp the firm, making it more aggressive. He also introduced it to the mergers business, whereby the firm’s reputation would be made in the following years. The first major deal for Read came in 1920, when Dillon helped refinance the Goodyear Tire & Rubber Co. The size of the $90 million transaction established the firm’s reputation on Wall Street, and its name was officially changed to Dillon Read in the same year.
Dillon’s best-known deal came later in the 1920s, when he won the mandate to arrange the sale of Dodge Brothers, the third-largest automobile manufacturer in the country. After the death of the two brothers, the company was put up for sale by the Dodge family, and Dillon bid for it, intending to run the company himself. He competed with J. P. Morgan Jr., who bid for the company on behalf of GENERAL MOTORS. Dillon won the bidding with an offer that was less than Morgan’s but was all cash versus a cash and securities offer by Morgan. Dillon’s method of estimating the company’s future cash flows and then discounting their value to arrive at his bid price was one of the first deals employing that method, which has been commonly used on Wall Street since that time. The deal established the firm’s reputation as a merger and acquisitions specialist.
Within a few years, Dillon realized that he was unable to run Dodge successfully and in 1928 sold the company to Walter CHRYSLER of Chrysler Motors for $170 million, $24 million more than the purchase price. The deal made Chrysler the second-largest manufacturer in the country at the time. Dillon withdrew from the firm at the end of the 1920s to pursue other interests. The firm continued as a small merger specialist with other limited product lines, including underwriting. In 1971, it chose Nicholas Brady as its senior partner. Brady later became secretary of the Treasury under Ronald Reagan. Clarence Dillon died in 1979.
Dillon Read survived as a partnership until BARING BROTHERS of Britain bought a 40 percent stake in the mid-1990s. A scandal at the British bank caused Dillon Read to buy back the share, and the bank remained independent until it was purchased by the Swiss Bank Corp. in 1997 and merged with another subsidiary, S. G. Warburg & Co. After the purchase, it operated as Warburg Dillon Read.
See also INVESTMENT BANKING; MORGAN, JOHN PIERPONT, JR.
Further reading
- Geisst, Charles R. The Last Partnerships: Inside the Great Wall Street Money Dynasties. New York: McGraw-Hill, 2002.
- Perez, Robert C., and Edward F. Willett. Clarence Dillon: Wall Street Enigma. Lanham, Md.: Madison Books, 1995.
- Sobel, Robert. The Life and Times of Dillon Read. New York: Dutton, 1991.