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Merger heaven Salomon Smith Barney has had an exciting two years. In December 1997, Travelers bought Salomon for more than $9 billion, merging Salomon with Travelers' brokerage arm, Smith Barney, to create Salomon Smith Barney. Travelers then merged with Citicorp, creating the merged entity Citigroup in October 1998. Salomon Smith Barney rests comfortably in the top tier with peers like Morgan Stanley Dean Witter (also the product of a mega-merger), Merrill Lynch, and Goldman Sachs. The merger with Citicorp has begun to pay identifiable dividends. In May 1999, Crain's New York Business reported that just a few weeks after Salomon Smith Barney brokers began hawking Citibank products such as mortgage and home-equity loans, the cross-selling began to pay off appreciably. Merger purgatory So where does this leave Salomon Smith Barney? At the grownup table, seated next to big boys like MSDW and Goldman. Despite a somewhat rocky beginning due to restructuring costs, the merger has proved thus far to be a success. Though there were initial concerns about overlapping business and clashing cultures, the merger has allowed Salomon Smith Barney to reach a "critical mass" in certain industries (the combination of clients in the energy industry, for example, has enabled the firm to become a player in that field), and strengthening its position across the board. With the addition of Citicorp's global presence, the firm expects to have increased leverage internationally. Merger assessment Both the Salomon/Smith Barney and Citigroup mergers got off to somewhat shaky starts, with key executives leaving. When Travelers sought to reduce the firm's risk profile by curtailing Salomon's famed proprietary bond trading activities (after the first merger between Salomon Brothers and Smith Barney), that group's head left. Other major figures, such as John McFarlane, who played a role in Salomon's recovery after a Treasury bond scandal that almost tanked the firm in the early '90s, also walked. The Citigroup merger led to high profile departures as well. In November 1998, Jamie Dimon, then-CEO of Salomon Smith Barney and Citigroup chairman Sanford I. Weill's longtime right-hand man, resigned after disagreements about the future autonomy of Salomon Smith Barney. From a business standpoint, however, the combined businesses are working together well. Salomon Smith Barney ranked an impressive No. 2 in domestic combined debt and equity underwriting in 1998. In May 1999, the firm's retail brokers began taking advantage of Citibank's strengths, offering products such as mortgages. The third merger : more culture shock? In January 2000, Citigroup announced the acquisition of the investment banking business of Schroders PLC of the U.K. Salomon Smith Barney execs believe the $2.2 billion acquisition will significantly improve Citigroup's previously unimpressive European presence. The company will be known in Europe as Schroders Salomon Smith Barney. Sanford I. Weill told The New York Times that the deal would put his firm "two or three years ahead of where we would have been" in investment banking in Europe. The deal has yet to shake out, but rumors of departures and upcoming cuts abound. The Financial Times of London reported that "Schroder's rivals are hoping that its bankers will be demoralized by the news that they are to be bought by Citigroup." The newspaper also reported that these rivals and headhunters were "stirring fears of a massive culture clash between Schroders and Salomon Smith Barney" and that one rival banker called the deal "a marriage made in hell." Senior executives remain calm, however. Sir Win Bischoff, Schroders' chairman, explained to the paper that "Salomon Smith Barney is different, but they have been building a business with the kind of people we employ." Citigroup executives have been more forthcoming in admitting that the deal would result in the loss of many jobs. Michael Carpenter, chairman of Salomon Smith Barney revealed to The Times that "in the U.S. we have considerable overlap [between the two firms]." Fixed income strength Salomon Smith Barney is the perennial leader in underwriting fixed income offerings, and providing liquidity in those markets. The firm ranked No. 3 as an underwriter of high-yield bonds (junk bonds) in 1998, and was No. 3 in investment-grade debt underwriting. In 1998, SSB lead-managed four of the largest debt offerings that year, including a $10 billion deal. Salomon Smith Barney is the perennial leader in underwriting "tax-exempt" debt (debt issued by municipalities) and mortgage-backed securities (securities that package together payments on mortgages), which Salomon Brothers pioneered in the 1980s. In news on the muni front, Salomon Smith Barney was named the lead senior manager for the first two tobacco securitization plans (the transformation of revenue from the large tobacco settlement into bonds) in the summer of 1999. Salomon Smith Barney has been tapped by New York City and Nassau County, NY to transform the revenue streams into fixed income. In 1999, the firm was the No. 1 lead underwriter of U.S. long-term municipal new issues, with a total of 469 issues valued at $30.8 billion. With the help of Citibank's credit card origination business, Salomon Smith Barney has zoomed to the top of yet another fixed income business, the underwriting of asset-backed securities. The firm ranked No. 2 in 1999 with $35 billion in proceeds, after finishing No. 4 in 1998 with $28.3 billion in proceeds. In 1999, the firm ranked No. 2 (up from No. 3 in 1998) in high yield with over $13.5 billion in proceeds, trailing only perennial junk bond leader DLJ. In the less lucrative investment grade debt category, Salomon was also ranked No. 2 in 1999 behind debt powerhouse Merrill Lynch. In an article about investment grade debt underwriting in Investment Dealers' Digest in June 1999, Salomon was cited as the "firm most frequently mentioned as a contender for Merrill's throne." In 1999, SSB lead-managed $111 billion worth of deals, up from $98 billion in 1998. Trouble in M&A and new equity businesses Salomon Smith Barney has experienced a recent downturn in M&A advisory. In 1997, the firm advised WorldCom in its $37 billion acquisition of MCI, and in 1998 advised Texas-based SBC Communications in its $72.3 billion acquisition of Chicago-based Ameritech. Salomon ranked No. 4 in 1998 in M&A advising on $354.8 billion of completed worldwide deals, moving up two spots from 1997. However, in 1999, the firm fell to No. 7, advising on $291.7 billion worth of deals. While Salomon is having trouble on some M&A fronts, it has enjoyed continued success in Latin America. In 1999, for the second year in a row, SSB ranked as the top advisor of M&A transactions in the region. The firm advised on 21 completed deals worth $28.2 billion. Salomon also slipped in the league tables when it comes to underwriting IPOs: the firm fell to No. 9 in 1999 from No. 4 in 1998 as a lead manager of initial offerings. In overall common stock underwriting, the firm managed to hold its place at No. 5. Overseas expansion Like other prominent Wall Street firms, Salomon Smith Barney is expanding globally. In March 1999, Salomon opened a joint investment banking venture in Japan with the country's third-largest brokerage firm, Nikko, employing a staff of about 1,100. That same month, the firm shifted some of its senior executives to London as part of its aim to aggressively build its investment banking business in Europe. Michael Klein, formerly the global head of the financial entrepreneurs practice, and Edward Miller, the co-head of the industrial company group, moved from New York to London to jointly head European investment banking. With the advent of the Euro, Europe should prove a more fertile ground for investment banking in the coming years. The firm hopes the acquisition of the investment banking business of Schroders PLC will also boost Salomon's European banking practice. In July 2000 Salomon Smith Barney Australia Pty Ltd. announced it would acquire HSBC Bank Australia Ltd.'s retail stockbroking business. This move follows the bank's expansion into the land down under; in September 1999 it had acquired Australia and New Zealand Banking Group's retail-stockbroking business. The company did not disclose financial details of the deal.
Salomon Smith Barney conducts its hiring independent of Citigroup, and maintains the typical I-banking interview process. Since most new analysts and associates are recent undergrad or B-school grads, a campus interview usually starts off the process. Says one recent hire: "I had a first round in the morning, a second round in the evening, and then the final round in New York." Several insiders report receiving two-on-one interviews during the on-campus interviews. The second round, for those who are invited to participate, usually involves a full day of interviews at the firm's headquarters. "It was a few hours, six interviews," reports one recent interviewee. Most applicants participate in a Saturday session referred to as a "Super Saturday." Says one contact: "The interviews start out rather informal and the final round is usually five or more interviews on a Saturday." The firm provides a thorough recruiting calendar for students on its web site, at www.salomonsmithbarney.com.
The benefits of globalization Like many other top-tier Wall Street firms, Salomon Smith Barney I-banking analysts generally stay for two years, with the option to stay on for a third year. One of the perks of the firm's global expansion is that this third year can often be pursued in an international office. "There's been increasing international opportunity, especially as we're trying to build our London office," reports one third-year analyst. "A lot of people got offers to go out that way, so they did two years domestically, and got a third year in London on Hong Kong." Generalist MBA associate program Salomon Smith Barney is unusual among most banks on Wall Street for the amount of flexibility it affords its MBA graduate hires. Over 10 months, newly hired MBA-level associates rotate through five groups - either industry or product groups - and can also be sent overseas to Europe, Asia or to offices in San Francisco, L.A. or Toronto. In 1999, insiders say, the firm will offer rotations in Australia. "The first benefit of the program is to get around and get to know a lot of people," explains one associate. "Also, you get have a broad base of experience." Two cultures That the Salomon and Smith Barney cultures contrasted is not in dispute. "Salomon is much more aggressive, much more individualistic, somewhat Neanderthal-like," explains one insider from the Salomon side. Says one who was hired initially by Smith Barney: "On the investment banking side, you could see it in terms of team players. The Solly people came out more as individual - the 'I don't give a shit what you need to do, I need to get my work done' thing. You get a lot of that in banking, but more so at Solly - it's a little more ruthless." Other insiders say, however, that a year after the merger, divisions are "much less in view" and that the firm "benefits from the history of Salomon and Smith Barney without being quite either." Growing the franchise Salomon Smith Barney insiders are of the opinion that the bank's double mergers have been a success. Says one I-banking insider about the Salomon/Smith Barney merger: "Obviously you're going to have two firms with very different strengths. In shaking out that process, they're always going to be people who are uncomfortable." "People are much more comfortable now, in terms of being merged. It's an interesting hybrid." And, says a trading associate: "There's been turnover, but no more turnover than I think you see in a typical merger - I don't think there was anything drastic, or anything that hurt the firm at all." Rising benefits from Citigroup Insiders are happy to watch Salomon Smith Barney's standing in the league tables rise. Salomon Smith Barney contacts frequently remark on business improvements stemming from the Citicorp merger. "There was a ton of negative press, and certainly there were some growing pains where they mapped out whose responsible for what, but about a third of what I've done has involved Citigroup," reports one investment banking associate. "Right now I'm working on a high-yield transaction that they brought in because of their relationships. I think the relationships have been fantastic." Changes in perks Insiders have complained about the firm's stinginess post-merger. Says one insider: "One thing that I would definitely mark as a topic of conversation at every single lunch and dinner, is that Travelers had a reputation for being really stingy. There were a lot of expenses getting extravagant among even analysts. You'd go out for client dinners, and there would be maybe only one client. You could expense a lot of stuff. When Travelers came in, they really checked on everything." As way of illustration, that insider, describes how one colleague who had been taking cabs to his girlfriend's apartment, located further away than his own, with no problem before the merger, was questioned about his rides post-merger. "He got called in, and asked 'What's this,' and he was just outraged." The firm has also reportedly adopted more stringent policies concerning travel - "you travel coach unless on a roadshow and the client's on first class."
Colleen O'Hora Human Resources
Donaldson, Lufkin & Jenrette;Goldman Sachs;J.P. Morgan;Lehman Brothers;Merrill Lynch;Morgan Stanley Dean Witter More Company Profiles For more career information, go to Vault.com ©2000, Vault.com Inc
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