Sanford C. Bernstein: The Fork in the Road (A)

Soon after the death of the firm's legendary founder, the individuals then serving as chairman and as president--Lewis A. Sanders and Roger Hertog, respectively--talked about the future of their firm. Sanford C. Bernstein & Co., a private investment firm, had grown rapidly in customers, assets under management, and personnel during the previous decade. Its institutional research department, which performed equity research for distribution to major money managers around the world, was considered one of the best such sources in the industry. Its own money management business managed $87.4 billion in 1999. However, as market conditions became more challenging for value-based managers during the late 1990s, the firm's most important portfolios were underperforming their benchmarks. Also, although the investment management industry had grown, it had also consolidated. The firm was facing some issues: How would it be affected by its founder's death? What was its competitive advantage? Does the firm's underlying value system have to change in a new competitive environment? Rumors were circulating about Bernstein going public in the future, merging, or being acquired. Should the firm even consider any of these options? How much was the firm worth?