Michael Klein’s fourth act may be his toughest | Reuters

LONDON, Oct 28 (Reuters Breakingviews) – Michael Klein has never met a deal he doesn’t like. The American rainmaker rose up the ranks at Citigroup (C.N) before going solo in 2010, subsequently advising on some of the biggest transactions of the decade. A recent adventure sponsoring special-purpose acquisition vehicles was less successful. Yet his toughest task yet will be making a success of Credit Suisse’s (CSGN.S) carved-out advisory unit, CS First Boston.

The Zurich-based bank announced on Thursday it plans to rebrand the unit which advises on mergers and securities offerings, reviving the name of the American firm it bought three decades ago. Credit Suisse is likely to sell a stake, issue equity to senior dealmakers and may eventually list the New York-based business with Klein as chief executive.

It’s a surprising move for both the $11 billion bank and for Klein, who sat on its board. Non-executive directors rarely parachute into the C-suite. To avoid accusations of a conflict of interest, Klein was recused from board discussions related to his new role, according to a person familiar with the matter. Besides, Credit Suisse needed someone with a record of advising on global mega-deals to lead the business. Even though the SPACs Klein sponsored have mostly flopped (see chart), he can still open boardroom doors.

The potential rewards are large. As CEO, Klein could end up with an equity stake in a listed firm worth anywhere from $2 billion to $6 billion based on Breakingviews calculations. That could bring a much bigger payday than pocketing deal fees earned by his small eponymous advisory firm. The corporate-finance challenge of carving a new boutique out of a major global bank may also be too much to resist.

That’s just as well, because CS First Boston has no shortage of challenges. Its strongest business is leveraged finance, which requires the backing of a big balance sheet. Credit Suisse will be reluctant to provide that, having already slashed exposures to $3.6 billion from $10.2 billion in early 2021.

Another issue is how CS First Boston’s bankers will work with their former wealth-management colleagues. Credit Suisse has struggled for years to encourage the two divisions to team up on deals involving billionaire business owners. That gets even more complicated when the bankers and wealth managers are part of different companies. Klein’s fourth investment banking act will be his toughest.

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(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

CONTEXT NEWS

Michael Klein will step down from the Credit Suisse board of directors to launch its carved-out dealmaking and advisory unit CS First Boston, the bank said on Oct. 27.

Klein, a former Citigroup banker who has been on the Credit Suisse board since 2018, will act as an adviser to Chief Executive Ulrich Körner. The bank anticipates that he will start as CEO of CS First Boston in 2023, taking over from David Miller, who is head of investment banking and capital markets.

Editing by Peter Thal Larsen and Oliver Taslic

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