Meet the New Real-Life Billionaire’s Boy’s Club

Bankers for Warren Buffett and Michael Dell are building them a financial Noah’s Ark.

BDT merchant bank, a private investment firm founded by Wall Street legend Byron Trott –with help from his most famous client, Buffett– announced Thursday that it has agreed to merge with MSD Partners, Dell’s family office. The combined $50 billion entity will focus on private equity deals and advising ultra-high net worth clients as the stock market turns bearish, according to the Financial Times. Who doesn’t like rooting for underdogs?

Family Offices Are Looking for an Oracle

An unprecedented amount of personal wealth was created between the end of 2008 and the beginning of 2022, while the S&P 500 expanded by more than 400%, and also created a whole new class of entrepreneurial billionaires, who will now be looking to protect their money during a looming economic downturn. Most will turn to family offices, private investment vehicles that the ultra-wealthy use to manage their fortunes. To get a sense of how much money we’re talking about, data from RBC Wealth Management shows that family offices managed more than $179 billion in the US alone at the end of 2021.

That creates a very attractive opportunity for boutique investment firms who know how to work with family offices and have star players running the show. Trott, who left Goldman Sachs in 2009 to start BDT with seed investment from Buffett, has built his bank into the go-to firm for family offices of high-profile billionaires like the Pritzker family of Hyatt Hotels and Walmart’s Walton clan. MSD is led by former Goldman Sachs investment banking co-chief Gregg Lemkau, who will run the new company with Trott.

• Trott, who Buffett has famously called the only banker he trusts, has cut big private equity deals at BDT on companies like Dr. Pepper and Weber Grills. He is also known as the guy who helped Goldman get an emergency $5 billion cash infusion at the height of the 2008 crisis from, you guessed it, The Oracle of Omaha himself.
• Lemkau, who left Goldman in 2020, was the tech bro billionaire liaison between the megabank and clients like Elon Musk and former Uber leader, Travis Kalanick. He has made it clear that he has plans to turn the $20 billion MDS into a legit private equity player.

“I am a great admirer of what Byron and the BDT team have built by providing comprehensive solutions for families like mine,” Dell said in a statement announcing the deal. “And the opportunity to combine is extremely compelling.”

Goldman, Goldman, Everywhere…Trott and Lemkau getting together comes at an awkward time for their former employer, which just announced its second major restructuring in four years and is bracing for a different kind of recession with investment banking revenue falling. And Goldman can’t count on this deal for some quick cash. The advisor fees on this one are going to Ardea Partners, a small investment bank…founded, of course, by Goldman alums.