Dean Witter Reynolds traced its origins to two firms: Dean Witter & Co. founded in 1924 and Reynolds & Co. (later Reynolds Securities) founded in 1931.
Dean Witter & Co. (1924–1978)
Dean Witter & Company was founded by Dean G. Witter (together with his brother Guy Witter and cousin Jean Witter) as a retail brokerage firm in 1924.[2][10] With its original offices at 45 Montgomery Street in San Francisco, California, Dean Witter would be among the largest brokerages on the West Coast. Among Witter's original partners were Guy and Jean, as well as cousin Ed Witter and Fritz Janney. Prior to founding his own firm, Witter partnered with Charles R. Blyth to found Blyth, Witter & Co., another San Francisco based brokerage in 1914. After Witter's departure, Blyth would continue on his own (his firm was ultimately acquired by Paine Webber in 1979) and the two firms would remain competitors for decades.
Witter's family had moved to Northern California from Wausau, Wisconsin, settling in San Carlos, California in 1891. Before founding his own firms, Dean Witter had worked as a salesman for Louis Sloss & Company from his graduation from the University of California, Berkeley in 1909 until 1914.[11] Dean Witter would lead his company until his death in 1969.
In its early years, Dean Witter focused on dealing with municipal and corporate bonds. The company was highly successful in its first five years, purchasing a seat on the San Francisco Stock Exchange in 1928 and then opening an office in New York and purchasing a seat on the New York Stock Exchange in 1929. Although a relatively young company, Dean Witter survived Wall Street crash of 1929 and the Great Depression, posting profits every year during the 1930s and into the 1940s.
The company grew rapidly during the 1950s and 1960s, establishing itself as a major U.S. brokerage house and developing a reputation for innovation in the securities industry. In 1938, Dean Witter established its national research department, and in 1945, became the first retail securities firm to offer formal training for account executives. In 1953, the firm entered into an agreement to merge with Harris, Hall & Co., a Chicago investment banking and securities firm spun out of Harris Bank after the passage of the Glass Steagall Act. In the early 1950s, Harris, Hall was one of the 17 U.S. investment banking and securities firms named in the Justice Department's antitrust investigation of Wall Street commonly known as the Investment bankers case.[12] In 1962, Dean Witter became the first firm to use electronic data processing – a feat that paved the way for securities handling on Wall Street.
Following Witter's death in 1969, and the retirement of Guy Witter the following year, Jean Witter's son, William M. Witter, became CEO of Dean Witter & Co. After numerous brokerage firm acquisitions, Dean Witter went public in 1972. Dean Witter's initial public offering (shortly after the IPO of Reynolds Securities) was part of a rush of Wall Street firms to sell an interest in their privately held businesses to public investors, following Merrill Lynch's initial public offering in early 1971.
Reynolds Securities (1931–1978)
Reynolds & Co. was founded in 1931 in New York City by Richard S. Reynolds Jr., a 22-year-old tobacco heir, together with Charles H. Babcock and Thomas F. Staley.[13][14] In particular, Thomas F. Staley was Reynolds' cousin (the grandson of Major D. Reynolds, an older brother of R.J. Reynolds). In 1951, another senior partner, John D. Baker, joined the company.[15][16] Reynolds' father Richard S. Reynolds Sr. founded U.S. Foil Company, later Reynolds Metals (Reynolds wrap), and his great uncle was the founder of R. J. Reynolds Tobacco Company (RJR).
Like Dean Witter, the company survived the Depression, generating a profit each year. In 1934, Reynolds acquired F.A. Willard & Co.[17]
The Dean Witter Reynolds merger and the Sears acquisition (1978–1993)
In 1978 Dean Witter and Reynolds merged to form Dean Witter Reynolds Organization Inc. (DWRO) in what was then the largest securities-industry merger in U.S. history. The resultant company, Dean Witter Reynolds, was the fifth-largest broker in the U.S. One year later Dean Witter Reynolds became the first securities firm to have offices in all 50 U.S. states and Washington, D.C. After completion of the merger, Dean Witter Reynolds generated revenue of more than $520 million.[18][21]
In 1981, Dean Witter Reynolds was acquired by Sears, Roebuck and Company in a $600 million transaction. Sears' core retail business was facing several challenges, and the company decided to diversify into new businesses, including financial services. Sears, which was already in the financial services business through its ownership of the Allstate Insurance Company announced a major acquisition initiative in financial services. In addition to the acquisition of Dean Witter, Sears also acquired Coldwell Banker, the real estate brokerage company in 1981.[22] Sears intended for Dean Witter to form the foundation for a larger Sears Financial Services Network that would be available to customers through the company's retail stores.
Dean Witter Discover (1993–1997)
Sears' financial services initiative proved highly successful as Discover grew through the late 1980s and early 1990s. Furthermore, the substantial investment in the Discover business also began to pay off, with the business becoming highly profitable. The early 1990s were also a period of rapid growth for Dean Witter Reynolds as its strategy of focusing on the distribution of proprietary mutual funds through its extensive retail brokerage network began to bear fruit.
Dean Witter's core securities business and its Discover business generated combined revenue of $59 billion in 1992 and Sears announced that it would seek to monetize its investment.[31] In February and March 1993, Sears sold 20% of the company in an initial public offering, and the company was subsequently renamed Dean Witter, Discover & Co., with two primary operating subsidiaries: Dean Witter Reynolds and Discover Card. Later that year, the remaining 80% of shares were distributed to Sears' shareholders, giving Dean Witter complete independence from Sears.[32]
Dean Witter's corporate headquarters were located in New York City's 2 World Trade Center (i.e. South Tower), where the firm had occupied over 864000 sqft since 1985. Dean Witter was one of many tenants whose offices were evacuated as a result of the 1993 World Trade Center bombing, which took place during the firm's spinoff from Sears. Following, the firm's merger with Morgan Stanley, the firm's headquarters would be moved to 1585 Broadway
Merger with Morgan Stanley (1997–2009)
In 1997, Morgan Stanley Group, Inc. and Dean Witter Discover merged to form one of the largest global financial services firms: Morgan Stanley Dean Witter & Discover Co..[6] The combined firm later dropped the "Discover Co." name in 1998 and further the "Dean Witter" name in 2001.[7][8][33][34]
Although Morgan Stanley was the more prominent partner, Dean Witter's focus on retail investors, mutual funds and credit cards which were seen by the stock market as generating more stable cash flows than Morgan Stanley's investment banking business had by the time of the merger made it the more valuable partner in terms of market capitalization. Dean Witter's CEO, Philip Purcell, the main architect of the merger, became chairman and chief executive officer of the merged group.[35]
Acquisition history
The following is an illustration of the company's major mergers and acquisitions and historical predecessors:
