The transatlantic bets of 2000: PaineWebber and DLJ

UBS and PaineWebber

Two years after the merger, UBS made the largest acquisition in its history until then. On 12 July 2000 it announced that it would acquire the American broker PaineWebber for USD 73.50 per share, half in cash and half in UBS shares, a transaction valued at USD 10.8 billion. PaineWebber brought 8,554 financial advisers in 385 offices, 2.7 million affluent American clients and client assets of USD 452 billion. Its chairman, Donald Marron, was to become chairman of UBS North America and adviser to Marcel Ospel on strategy. After the transaction about half of the combined private client assets of the group were expected to come from wealthy and affluent clients in the United States, fifteen per cent from Swiss clients and thirty-five per cent from the rest of the world. Ospel declared that the combination of UBS’s international reach and product range with PaineWebber’s leading position in the American market for affluent and wealthy individuals would create a premier global investment services firm.¹

Once the transaction had been completed in November 2000, the American business traded for some years under the name UBS PaineWebber. On 9 June 2003 all business groups of UBS, including UBS PaineWebber and UBS Warburg, were rebranded under the single name UBS. The Historical Dictionary counts the acquisition among the steps that made UBS the largest wealth manager and one of the largest financial institutions in the world in the early years of the new century.² In strategic terms the logic was clear. PaineWebber gave UBS a distribution network for its investment products in the largest wealth market in the world, complementing the investment banking platform built on Warburg and Dillon Read. In cultural terms the task was more difficult. An American retail brokerage with thousands of commission-based advisers had little in common with a Swiss private bank whose relationship managers served a small number of wealthy clients with discretion and continuity. The integration of these worlds occupied the management for years.

The PaineWebber acquisition also changed the geography of UBS’s risks and of its legal exposure. With a large broker-dealer and wealth management business in the United States, the bank became subject to the full range of American securities, banking and tax regulation. The cross-border business with American clients booked in Switzerland, which later led to the crisis of 2008 and 2009 and to the end of banking secrecy for foreign clients, was conducted by a bank that also had a large regulated presence in the United States. That combination made UBS unusually vulnerable to pressure from the American authorities. It is treated in the third chapter of this Part.

Credit Suisse and Donaldson, Lufkin & Jenrette

Credit Suisse followed with its own transatlantic bet only weeks later. On 30 August 2000 Credit Suisse Group announced that Credit Suisse First Boston would acquire Donaldson, Lufkin & Jenrette (DLJ) for USD 11.5 billion, or CHF 19.6 billion, at USD 90 per share, half in cash and half in new Credit Suisse shares. The French insurer AXA and its American subsidiary, which together held about 71 per cent of DLJ, agreed to sell their stake for USD 8.1 billion. DLJ had more than 11,000 employees, 83 per cent of them in the United States, while CSFB employed about 16,000 people. The chairman and chief executive of the group, Lukas Mühlemann, described the acquisition as consistent with the group’s strategy of being a global leader in financial intermediation and asset gathering. The chief executive of CSFB, Allen Wheat, promised a winning platform for clients and staff around the world. Mühlemann had succeeded Rainer Gut as chairman in May 2000 while remaining chief executive.³

The timing proved unfortunate. Because the DLJ acquisition coincided with the end of the technology boom, the combined investment bank had to absorb a large workforce just when revenues from equity underwriting and mergers collapsed. After the bursting of the bubble Credit Suisse replaced Wheat with John Mack, formerly of Morgan Stanley, who cut about 10,000 jobs, a third of the workforce of CSFB. An investigation into the allocation of shares in initial public offerings led to criminal proceedings against the technology banker Frank Quattrone, whose conviction was later overturned. In 2002 the group reported a loss of CHF 3.3 billion, and over the period of the crisis about 20,000 jobs were eliminated. By June 2002 the share price had fallen by 45 per cent, destroying some CHF 44 billion of shareholder value, and Mühlemann, who had also resigned from the board of the collapsed Swissair in October 2001, came under strong pressure from shareholders.⁴

A shared conviction

The two acquisitions of the summer of 2000 express a conviction shared by the leaders of both Zurich banks. They believed that a Swiss bank could only secure its future as an independent global institution if it owned a major American franchise. UBS bought distribution to wealthy clients, and Credit Suisse bought investment banking capacity. Both paid prices set at the peak of the market and took on large numbers of American employees whose expectations of pay and whose understanding of risk were formed on Wall Street. Both banks thereby tied the fortunes of the Zurich financial centre more tightly than ever to the American business cycle and to American law. The balance sheets that grew out of these commitments were many times larger than Swiss gross domestic product in the following decade, a fact that became the central problem of Swiss financial policy after 2008.⁵

Notes

1. UBS AG and PaineWebber Group Inc., joint press release “UBS to Merge with PaineWebber”, 12 July 2000, filed with the US Securities and Exchange Commission, https://www.sec.gov/Archives/edgar/data/75754/000095015700000328/0000950157-00-000328.txt. ↩
2. Wikipedia, “UBS”, as cited above (completion of the PaineWebber transaction and single-brand strategy); HLS, “UBS”, https://hls-dhs-dss.ch/textes/d/D45643.php. ↩
3. Credit Suisse Group, press release on the acquisition of Donaldson, Lufkin & Jenrette, 30 August 2000, filed with the US Securities and Exchange Commission, https://www.sec.gov/Archives/edgar/data/29646/000094787100000582/0000947871-00-000582-0002.txt; Blick, “Aufstieg und Fall des Lukas Mühlemann”, as cited above. ↩
4. Wikipedia, “Credit Suisse First Boston”, as cited above; SRF News, “167 Jahre Credit Suisse”, as cited above; Blick, “Aufstieg und Fall des Lukas Mühlemann”, as cited above. ↩
5. swissinfo.ch, “Big banks warned they should downsize”, 11 September 2009, https://www.swissinfo.ch/eng/big-banks-warned-they-should-downsize/69356, reporting that on the eve of the financial crisis the balance sheets of UBS and Credit Suisse were seven times Swiss gross domestic product. The regulatory response is discussed in the fourth and sixth chapters of this Part. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of September 2025.