New Mountain’s Steven Klinsky: Finding Success After Forstmann Little –

When LBOs began to take place back in the late 1970s, Steven Klinsky was in graduate school thinking up ways to leave his mark on the world. Shortly after the first buyout deal he remembers, one in which Kohlberg, Kravis, Roberts & Co. bought Florida-based Houdaille Industries Inc. for a whopping $380 million, Klinsky became absolutely fascinated by the buyout concept. In fact, he was so enamored that he decided to write his thesis on the topic and rethink his future all together to incorporate buyouts into his life.“I figured this was a great, new industry, and no one could have more experience at it than I could because no one really knew about it,” Klinsky says. “Being involved in LBOs at that time was like going to Silicon Valley the year semiconductors were invented.”

After finishing his M.B.A at the Harvard business school and joining Goldman, Sachs & Co. as an associate in 1981, Klinsky’s thesis became a textbook of sorts around the office because there was very little information available about the new “buyout” phenomenon.

Additionally, because of his knowledge of the fast-growing industry, Klinsky was able to convince his bosses at Goldman Sachs to start a leveraged buyout group. After the group was set up Klinsky executed more than $3 billion worth of private equity transactions. “I came into Goldman’s merger department, and in 1981 when the bull market started, all I wanted to do was leveraged buyouts,” Klinsky explains.

While it seemed that Klinsky was easily climbing the corporate ladder at Goldman, his ascension didn’t come without hard work and some business savvy that he had inherited from his family. Raised in suburban Detroit, Klinsky grew up learning the ins and outs of the business world. His grandfather had owned a successful chain of women’s clothing stores in the Midwest. At one time, Klinsky planned on joining the family business. He had intended to buy a business with his father that would complement Alberts, the clothing chain. However, that dream never came to pass; Klinsky’s grandfather sold the family business while Klinsky was still a student.

Klinsky received a B.A. from the University of Michigan after only two years. What’s more, while earning his M.B.A. from Harvard, Klinsky managed to earn a law degree as well.

Now 45, Klinsky is the chief executive officer of New Mountain Capital LLC, a buyout firm he founded in January 2000. “It was becoming difficult for mega funds to make exceptional returns. There just weren’t that many great deals to do, and it’s hard to fund a lot of little companies because you lose focus. New Mountain is already having a great rate of return,” Klinsky says.

New Mountain’s first and only fund thus far was oversubscribed by $200 million and closed with $700 million in July 2001. Since then, New Mountain has invested $150 million into Strayer Education Inc., a subsidiary of Strayer University Inc., a regional institution of higher education that offers undergraduate and graduate degree programs to approximately 12,100 students at 14 campuses in Washington, D.C., Maryland and Virginia. Strayer also offers real-time online courses via the Internet through Strayer Online. Since New Mountain’s investment, Strayer’s value has increased by approximately three times. Furthermore, Strayer is not only debt free but also has $54 million of cash on hand.

“Starting my own fund and investing was just something I wanted to do, and I was ready to do it,” Klinsky says. “The last year and a half have been among the best years in my career. It is satisfying to create something new. I am really energized by the opportunity. There is nothing else I want to be doing.”

Prior to starting New Mountain Capital, following his rein at Goldman Sachs, Klinsky spent 15 years working at Forstmann Little & Co. After his first two years there Klinsky became the most senior general partner at the firm outside of the Forstmann family. To boot, Klinsky’s tenure as a senior partner coincided with the period of Forstmann Little’s greatest investment success. The firm realized over $6 billion of gains on investments made between 1990 and 1999, without one principal loss.

Additionally, it was at Forstmann Little where Klinsky worked on one of the most exciting deals of his life. In August of 1990, Forstmann made a $1.75 billion investment into General Instrument, a leading manufacturer and supplier of broadband equipment to the cable television and direct broadcast satellite industries.

“We took the company for $1 billion and grew it into a $17 billion enterprise. I worked with them for nine years and now the CEO of General Instrument is an investor in New Mountain. Working with them was a terrific experience,” says Klinsky.

Strayer, Klinsky first investment under New Mountain was also an exciting deal for him. The fact that the company is doing so well under New Mountain’s care fills Klinsky with pride. “I am happy with how much value we have added to the company,” he says.

Although Klinsky is proud of the Strayer deal, he certainly isn’t stopping there. New Mountain is just getting ready to close its second deal. “We’re doing an acquisition in surgery services. We have a letter of intent,” he says. “We target industries from the top down and then we attack proactively, and [in this case] we expect to commit around $100 million into the sugery services area in one investment,” Klinsky explains.

This second deal is really only the beginning for the new firm. Klinsky expects to make plenty of investments in 2002. His goal right now is to make New Mountain succeed. “I am very energized about New Mountain, and I really hope it becomes the best in class for a new generation of private equity investors. I would like New Mountain to be a leader for the next 10 years. I can’t think beyond that,” he says.

Other than New Mountain, which keeps him very busy, Klinsky has a full home life. He has been married for almost seven years after meeting his wife as she was walking down the street. At the time, she was a managing director at Bear Stearns.

Mrs. Klinsky has since left Bear Stearns to raise the couple’s two kids. “She is coming out with a book this fall about what it is like to be a woman on Wall Street,” Klinsky says, adding that he and his wife are expecting their third child in March.

Fact Sheet

Steven Klinsky

CEO and Founder

New Mountain Capital LLC

Born: May 30, 1956, Detroit, Mich.

Education: B.A., University of Michigan, 1976; J.D., Harvard Law School, 1981; M.B.A., Harvard Business School, 1981

Career Path: 1981 – 1984, Goldman, Sachs & Co.; 1984 – 1999, Forstmann Little & Co.; 2000 – Present, New Mountain Capital

Last Book Read: The Elegant Universe

by Brian Greene

Favorite Book: “The one my wife is writing.”

Last Movie Seen: Ocean’s Eleven

Favorite Movie: Godfather I and II

Favorite Food: Cereal with milk

Favorite Web Site: Stock quotes and news sites

Wheels: 1993 Porsche convertible

Favorite Travel Destination: Africa

Favorite Musician: Willie Nelson

Favorite Sports Team: 1968 Detroit Tigers

Most Admired Historical Figures:

George Washington & Winston Churchill

Favorite Quote: “Retreat, Hell. We just got here.” – U.S. Marines

Hobbies: “Playing with my kids.”

Investment Philosophy: Quality, growth, integrity, value added and exceptional returns.