Schwartz, Gerald W. 1941–
Gerald W. Schwartz
Cofounder, chairman, president, and chief executive officer, Onex Corporation
Education: University of Manitoba, BC, 1962; University of Manitoba, LLB, 1966; Harvard University, MBA, 1970.
Family: Son of Andrew and Lillian (Leith) Schwartz; married Heather Reisman (chief executive officer of Indigo Books & Music), May 15, 1982; children: four.
Career: Estabrook & Company, 1970–1973, vice president; Bear Stearns & Company, 1973–1977, vice president; CanWest Capital (later CanWest Global Communications), 1977–1984, cofounder and president; Onex Corporation, 1984–, founder, chairman, president, and chief executive officer.
Awards: International Distinguished Entrepreneur Award, University of Manitoba Faculty of Management, 2003.
■ Gerald W. Schwartz founded Onex Corporation, a diversified holding company, in 1983 and became chairman, president, and chief executive officer. Onex grew to become one of Canada's largest companies, with annual revenues of approximately $16 billion and 89,000 employees around the world. As one of Canada's wealthiest executives, Schwartz was regarded not only as a highly motivated, perfectionistic, and shrewd business leader but also as a generous philanthropist and a well-connected socialite.
Raised in Winnipeg, Manitoba, Schwartz was the only son of a lawyer and an auto parts dealer and had early ambitions
to make it big in the business world. In high school he aspired to be "an executive and to have a big job that would pay atleast $10,000 a year." He recalled, "I thought $10,000 was a big deal" (Maclean's, October 11, 1999). He attended the University of Manitoba, earning degrees in commerce and law. He remained in Winnipeg for two years, articling with the respected tax lawyer Izzy Asper, before embarking on a master's degree from the elite Harvard Business School in Boston. One summer job took Schwartz to Switzerland as an executive assistant to the U.S. financier Bernard Cornfeld, founder and head of the mutual fund investment firm Investors Overseas Services (which collapsed in 1973 following allegations of fraud).
After graduating in 1970 with a master's degree in business administration, Schwartz began working for the New York brokerage firm Estabrook & Company. In 1973 he joined the corporate finance department at Bear Stearns & Company, a global investment bank and brokerage firm based in New York City. Working alongside such investment bankers as Jerome Kohlberg, Henry Kravis, and George Roberts (who later left Bear Stearns to form the investment company KKR), Schwartz learned deal-making techniques from the pioneers of the leveraged buyout (LBO)—the buyout of a target company with borrowed money, using the company's asset value as security for the loan. Schwartz said of his days at Bear Stearns, "Back then it used to be Kohlberg, Kravis, Roberts & Schwartz" (Forbes, September 7, 1987).
In 1977 Schwartz took the skills he had learned on Wall Street back to Canada, partnering with his former employer Izzy Asper to form CanWest Capital Corporation. Over the next seven years CanWest acquired several small companies, but by the early 1980s the partners' business relationship had deteriorated over differences in strategy. Asper said of his colleague at the time, "I believe in planting trees, growing them and then eating the apples. Gerry believes in growing trees, selling them and then looking for other trees" (Canadian Business, March 2, 2003). Schwartz was not deterred; with $2 million of his own money and nearly $50 million from investors, he left CanWest in 1983 and moved to Toronto to form his own holding company, Onex.
ONEX: A NEW CHAPTER
Schwartz's vision for Onex was to acquire undervalued and mismanaged companies, then to sell the acquisitions for a profit after streamlining their infrastructures or adding to their asset base. Over Onex's first few years, purchases included Purolator Courier, American Can Canada, and Sky Chefs. By the time Onex went public in 1987, Schwartz had acquired five companies for $1.3 billion. The initial public offering in April 1987 raised $246 million, with Schwartz retaining 60 percent control over the company. Later that year, Onex completed another major acquisition—Beatrice Foods Canada. Then in the late 1980s the pace at which Schwartz had been tackling acquisitions slowed to a standstill in the face of a generally frenzied LBO market. Explaining his reluctance to rush into acquisitions (in 1988, for example, he turned down about one hundred), Schwartz said, "We take an excruciating length of time to buy an asset. We did nothing in the late 1980s because of all the pressure to do deals. That's not our game" (Maclean's, August 2, 1993).
Despite Schwartz's efforts to distance Onex from his former LBO connections, the company suffered setbacks in the early 1990s as the popularity of the LBO waned and Canada entered an economic recession. Onex's executive compensation system also came under fire when it became evident that Schwartz was assessing a 20 percent fee on the company's profits. Shareholders protested, and Onex's stock dropped from its 1988 peak of $20.50 to $4.75 in 1990. Schwartz restructured the compensation program and asked investors to remain patient. "I don't feel much need to prove anything to anybody," he said. "I think Onex will speak for itself" (Canadian Business, March 2, 2003). Schwartz sold Beatrice Foods in 1991, garnering a large profit, in addition to several other acquisitions. By the mid-1990s the tides had begun to turn, and many of Onex's holdings began to pay off.
Two attempted acquisitions in particular kept Schwartz in the headlines in the 1990s. In 1995 Schwartz lost a bid to buy out John Labatt, a major brewer and entertainment company. Then in 1999, in another heavily publicized effort, Schwartz attempted to acquire and merge Canada's two largest airlines; the deal fell through after a Quebec court deemed the bid illegal. Several of Schwartz's successful bids in the late 1990s, however, later became some of Onex's most profitable holdings, including Celestica and ClientLogic.
IN THE LIMELIGHT
Schwartz generated headlines not only for his aggressive bids but also for his lavish lifestyle and political ties. He and wife, Heather Reisman (founder and chief executive officer of Indigo Books & Music), were known for throwing elaborate parties at their home in the affluent Rosedale neighborhood in Toronto and for giving extravagant gifts. Schwartz was well connected in Canadian political circles, fund-raising for Liberal leaders and counting eminent politicians as his personal friends. One Liberal strategist said of Schwartz's involvement in politics, "Gerry has been involved with just about everybody in power. But you also have to realize that this stems in part from a strong sense of public service. And that it's real, not fake" (Maclean's, October 11, 1999).
That sense of public service also drove Schwartz and his wife to contribute major gifts to such organizations as Mount Sinai Hospital in Toronto and St. Francis Xavier University in Nova Scotia, which established the Gerald Schwartz School of Business and Information Systems in 1999.
Onex's success was due in large part to Schwartz's entrepreneurial and collaborative style of management. His team was loyal and collegial, and as a leader Schwartz maintained a nonhierarchical, team-spirited environment: "One of the hallmarks of Onex is that since I started the company in 1983, every professional who has joined the company at our Toronto head office is still here. We've had no turnover" (Ivey Business Journal, July 2000). Schwartz was widely admired in the business community for his leadership and personal commitment. Honored by the Harvard Business School in 2000, Schwartz was described as a "brilliant entrepreneur, a distinguished son of Harvard, a beautiful friend, a remarkable man, a committed citizen, and a proud Canadian" (HBS Bulletin, June 2000).
See also entries on Bear Stearns Companies, Inc., Estabrook & Company, and Onex Corporation in International Directory of Company Histories.
sources for further information
"A Canadian Hero," Harvard Business School Bulletin, June 2000.
Condon, Bernard, "Kravis of the North," Forbes, March 6, 2000, p. 76.
Jereski, Laura, "Can-Do Canadian," Forbes, September 7, 1987, p. 124.
"Learn from the Best: Onex," Canadian Business, March 2, 2003.
McMurdy, Deirdre, "Southern Accent," Maclean's, August 2, 1993, pp. 26–28.
Newman, Peter C., "Gerry Schwartz Has the Right Stuff," Maclean's, September 13, 1999, p. 17.
Noble, Kimberley, "Why Gerry Schwartz Needs Air Canada," Maclean's, October 11, 1999, p. 46.
Pearce, Ed, "Flying High," Ivey Business Journal, July 2000, p. 18.
—Stephanie Dionne Sherk