Summary:
- Michael Klein will be able to use Credit Suisse’s $707 billion balance sheet to strengthen the company’s once-dominant operations in stock and bond underwriting and deal advice.
- The goal is to bring back the reputation and culture of the investment bank from the heyday of the 1980s.
- M. Klein’s advisory firm, M. Klein & Co., will be incorporated into the new CS First Boston.
- The decision comes at a time when the banker’s other businesses, such as the formation of SPVs for acquisitions, are slowing down.
- Both Credit Suisse and Mr. Klein declined requests for interviews.
- He is a graduate of First Boston and worked in Saudi Arabia on the Aramco-Dow merger.
Since leaving Citigroup Inc. more than ten years ago, Michael Klein has helped some of the most influential businesses and investors in the world find each other. And now Klein quietly launches his operation with some highly guarded strategy for Credit Suisse.
Now, in a third act that enables him to become a significant Wall Street CEO, he has found his own match as the soon-to-be chief executive of Credit Suisse CS 2.61%increase; green up pointing triangle Group AG’s newly reborn investment banking unit, CS First Boston.
Credit Suisse announcement
In a move to survive, Credit Suisse announced on Thursday that it would separate CS First Boston and eliminate 9,000 jobs while selling $4 billion in new stock. According to executives, the majority of the unit may eventually belong to outside investors and employees.
After serving as the chairman of a board-led strategy committee this summer and overseeing a review of Credit Suisse’s investment bank, Mr. Klein, 58, was unexpectedly appointed.
Mr. Klein will be able to use Credit Suisse’s $707 billion balance sheet in his new position to strengthen the company’s once-dominant operations in stock and bond underwriting and deal advice. Mr. Klein narrowly missed out on the top position at Citi. The goal is to bring back the reputation and culture of the investment bank from the heyday of the 1980s when Mr. Klein was just starting out at First Boston’s rival Salomon Brothers.
Klein Quietly Launches his propaganda
Mr. Klein’s ambition, connections, and instincts, according to the banker’s admirers, should give the new unit momentum and a leader to rally around. After financial and reputational scandals, low morale led to the departure of many Credit Suisse bankers. Bankers have long complained about not having enough autonomy, including some who came from First Boston and Donaldson, Lufkin & Jenrette, another Credit Suisse acquisition.
Raymond McGuire, who Mr. Klein hired to Citigroup in 2005 and who later served as the bank’s vice chairman before making an unsuccessful bid for mayor of New York City last year, said that “where others see uncertainty and dislocation, Michael sees clarity and opportunity.”
Others wonder if it makes sense to appoint Mr. Klein to lead a company he helped create given the potential for conflict of interest.
Mr. Klein could only “contribute from a more technical perspective, helping to create the fact base for decision-making,” according to Credit Suisse Chairman Axel Lehmann, who claimed that Mr. Klein did not cast a vote on plans.
With operational mechanisms, Klein quietly launches an operation
According to a person familiar with the situation, Mr. Klein’s advisory firm, M. Klein & Co., will be incorporated into the new CS First Boston. Both Credit Suisse and Mr. Klein declined requests for interviews. The decision comes at a time when the banker’s other businesses, such as the formation of SPVs for acquisitions, are slowing down. With varying degrees of success, Mr. Klein became the face of the current SPAC craze.
As chairman of Credit Suisse at the time, Urs Rohner assisted in bringing Mr. Klein onto the board in order to increase the Swiss bank’s ability to manage the wealth of some of the wealthiest families in the Middle East and the United States.
When Credit Suisse suffered a $5 billion loss as a result of Archegos Capital Management’s demise in March 2021, Mr. Klein’s involvement increased. Credit Suisse decided to separate CS First Boston on Thursday after trying to address internal issues and beginning to cut back.
According to a source familiar with the board’s deliberations, as the strategy solidified, Mr. Klein emerged as the undisputed front-runner to head the company.
Ulrich Korner, CEO of Credit Suisse, stated that the independent unit might be worth more under new ownership or through a stock market listing, with Credit Suisse maintaining a minority stake.
Background of Mr. Klein
Mr. Klein began his career at Salomon Brothers after graduating from college when the company was at its peak in the 1980s. As the company merged with what would become Citigroup, he rose through the ranks, driving it into corporate advice and stealing clients from rivals.
People who knew him said he wanted to be Citigroup’s CEO but left after the bank selected Vikram Pandit and as Wall Street descended into crisis in the summer of 2008.
When Mr. Klein left, Dow Chemical Co. needed his assistance as they were planning an acquisition. Former Dow CEO and current board member at Citigroup, Andrew Liveris, agreed to lift Mr. Pandit’s noncompete clause. Mr. Klein’s boutique demonstrated a flair for repeat business by assisting Dow on its $120 billion merger agreement with DuPont Co. in 2015.
A similar call came to Mr. Pandit in September 2008. In order to save a large portion of Lehman Brothers’ U.S. business from bankruptcy, Bob Diamond, then president of Barclays PLC, needed Mr. Klein’s assistance. This victory for the British bank netted Mr. Klein $10 million.
Howard Ungerleider, who is currently Dow’s president and chief financial officer, described him as “probably the hardest-working person I know on Wall Street.”
People who have worked with Mr. Klein claim that, in contrast to some bankers of his generation, he is polite and frequently sends personalized thank-you notes.
The Saudi achievement
Working in Saudi Arabia, including on the 2011 joint venture between Saudi Aramco, officially known as Saudi Arabian Oil Co., and Dow, helped Mr. Klein rise to fame. According to Saudi officials with knowledge of the situation, the then-president, and CEO of Aramco, Khalid al-Falih, was impressed and requested his assistance in 2019 to prepare for the company’s massive IPO.
When bankers informed the Saudis that they would not receive the desired $2 trillion valuation, Mr. Klein reportedly became deeply involved in the details, creating slides and brainstorming with them about new marketing tactics.
According to Mr. Liveris, Mr. Klein convinced the opposing party to quickly send some money as a sign of good faith in a significant arbitration case. Mr. Liveris praised Mr. Klein’s negotiation abilities and work on both the arbitration and the Dow-DuPont merger, saying that it was “a little bit cheeky” of him to ask.
Mr. Klein will have thought about all the aspects of what he is taking on, according to Mr. McGuire, who is also a graduate of First Boston. The future of Credit Suisse is still far from certain, and some analysts have warned that the spinoff may make efforts at simplification more difficult.
Michael Klein, in my opinion, never acts without a plan, Mr. McGuire said.
