Personalities : Michael Klein: Salomon Smith Barney’s Right-Hand Man For All Seasons –

He’s got gumption, that’s for sure.

This year marks Michael Klein’s 16th with Salomon Smith Barney, a firm that has been subject to more than its fair share of mergers and name changes over the years. Amid all the changes, the firm has somehow succeeded in keeping Klein on its payroll.

He credits Salomon Smith Barney with having the ability to keep him guessing as to what exactly will come his way next. As a perfect example, just last month Klein saw one more title added to his business card – co-head of global investment banking. But that is just one of three titles. Klein, who is a managing director at Salomon Smith Barney, has also been tagged head of the Financial Entrepreneurs Group and co-head of acquisition finance for the firm.

“I started in this business in what I thought was going to be a two-year job,” Klein says with a chuckle. “I’ve been very surprised that opportunities have come my way consistently enough to always make staying here more enjoyable.”

Also falling under his management are the investment bank’s private equity group and alternative investment efforts. Additionally, Klein is a member of both Salomon Smith Barney’s management team and its commitment committee.

Spring Chicken

After graduating Cum Laude from the University of Pennsylvania’s Wharton School of Business in 1985 with a bachelor’s degree in economics, Klein joined the Salomon Brothers mergers and acquisitions group. He gained the prestige of the managing director level in 1993, as he was pronounced co-head of the firm’s start-up advisory business called the Financial Entrepreneurs Group, a group that had been started in 1987 with heavy influence from Klein. The Financial Entrepreneurs Group (FEG) provides equity and debt financing and mergers and acquisitions advice, primarily to buyout firms and their portfolio companies.

Committing to such an entity as FEG was practically unheard of among investment banks in 1987. No one knew for sure what role private equity would play in the upcoming decade, but according to Klein, Salomon Brothers decided that year that the trend toward raising private equity funds was going to create multiple points of connection between private equity firms and groups like Salomon Brothers, leading it to set up FEG as a “relationship force that was a lot like a standard investment banking relationship for private equity groups.”

FEG became Klein’s baby. He has been in the group since its inception and has watched the group grow to approximately 85 investment bankers serving more than 40 buyout firms as clients, including the biggest names in the industry – Kohlberg Kravis Roberts & Co., Hicks, Muse, Tate & Furst, Apollo Advisors, The Blackstone Group, Thomas H. Lee Co. and Clayton Dubilier & Rice.

The Financial Entrepreneurs Group is one of the largest of its kind on Wall Street, says Klein. It completed more than $30 billion in financing and mergers and acquisitions transactions in the past year, and Klein says he had no idea the group would be so successful.

“We were early,” he says. “There were only a couple of groups that had a similar view as us back in 1987 – a view that financial sponsors were evolving in a very big way. We really had no clue at the time exactly how right we would be.”

Klein started his ascent up the corporate ladder in 1993, and was named to the Smith Barney investment banking management committee and the capital commitment committee in 1995. In 1997, he founded the firm’s alternative investment group, raised its first fund-of-funds, and was named to the Salomon Smith Barney management committee upon the two firms’ merger. The following year he founded Salomon Smith Barney private equity group, and was named co-head of acquisition finance upon the Citibank merger. Last year Klein was named co-head of European investment banking and vice chairman of Salomon Smith Barney Global investment banking, the group of which he became co-head last month.

Global Guy

Klein shares his title of co-head of global investment banking with two others, Robert Morse and Eduardo Mestre. Their domain spans the emerging markets of Asia, Latin America, Japan, Europe and the U.S.

Emotions about the promotion came in two stages for Klein.

“The first thought I had was a general sense of enthusiasm,” he says. “Secondly, I felt like the organization was really trying to recognize some of the efforts that I had made and at the same time was trying to create a management structure that allowed for us to grow our business.”

But that was all just part of the first phase. Once reality hit, Klein says it was unclear to him exactly what the position was going to entail or how his life was going to change. By the same token, he says, “I thought in the end it would clearly make the impact I could have on the organization a bit bigger.”

Over the past seven and one-half months, Klein has spent approximately one week a month in the U.S. He was forced to get used to such a rigorous travel schedule when Salomon Smith Barney appointed him to help lead the expansion of its investment banking business in Europe and moved him to London in March of 1999.

“It was a surprise to me that the firm gave me the opportunity to help shape our business in Europe. It wasn’t my background, wasn’t something I had anticipated,” he says. “You just learn with an organization like this that if they want you to do something, you do it and you do your very best. Also, I think they plain old trusted me, and that counts for a lot.”

To some extent it was a natural move because a significant number of Klein’s clients, in investment banking and in private equity, had begun to do very material transactions in Europe, he says. “It was viewed that my strategic planning and recruiting experience would help us develop a presence more quickly,” he adds.

Klein and Edward Miller, his partner in the task to grow the European banking business for Salomon Smith Barney, started with less than 200 bankers in Europe. They hired 150 in 1999, then merged with Schroders that same year, gaining more than 300, and now operate with more than 600 investment bankers in Europe.

With that business well underway, Klein will be able to spend more time in the U.S. from here on out, but keeping all the bankers around the world on the same page, not just in Europe, has now become one of many of Klein’s responsibilities. “We are working hard to make sure the industry groups we work with are handled on an interconnected global basis, all with the same initiatives,” he says. “That makes for a lot of plane rides.”

At the same time, Klein is still an active participant in the every day operations of FEG. With the recent interest of U.S. private equity firms in Europe, he will still spend approximately half the year in London.

“There’s such a massive increase in the buyout business in Europe,” he says. “At least one-third of the capital right now is targeted toward Europe.”

Most recently, under Klein’s guidance, FEG has played a significant role in several well-publicized European buyout transactions.

The group located an executive named Dick Callahan, partnered him with Blackstone and Investcorp, and assisted the group in arranging the financing to acquire the cable assets of Deutsche Telekom for approximately $4 billion.

FEG also worked with Texas Pacific Group in the acquisition of Punch Taverns, providing them with a financing solution that saved TPG and the Punch Group more than $30 million a year in interest expenses. As icing on the cake, the deal was taken away from Morgan Stanley Dean Witter, which had bridged it, and given to Salomon Smith Barney. “And that was big for us,” Klein says.

Having ascended to such a lofty position at Salomon Smith Barney, one might think Klein would hand off the control of FEG to someone else, but he is just as committed as ever.

“I stay involved because it’s a cornerstone of the firm and it’s a franchise we value highly,” he says. “And I’ve been there since the beginning.”