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What’s old is often new againWhat’s old is often new again, or so goes a variation of a phrase. The phrase couldn’t be more suitable this year than in the world of Wall Street, where a perfect credit storm just brought down the 158 year old storied banking franchise Lehman Brothers and resulted in JPMorgan’s bargain-basement purchase of Bear Stearns earlier this summer. All the cliffhanger-like speculation that had been swirling this summer about the fate of Lehman Brothers ended on Monday when the investment bank announced its bankruptcy filing. The middle market private equity business within Lehman, though, is likely to face a more promising future than its parent. Lehman Brothers Merchant Banking (LBMB), a 22 year-old leveraged buyout-making unit within the investment banking house, will most certainly have to find a new home as a result of the bankruptcy, which doesn’t affect the bank’s subsidiary units. The group has 35 professionals spread between offices in New York, London and Hong Kong. It also manages four funds including its latest $3.3 billion investment vehicle raised last year. There had been questions about whether LBMB it would be absorbed into an acquirer of Lehman the way One Equity Partners became part of JPMorgan following its acquisition of Bank One a few years ago. But, that scenario wasn’t overly promising since many banks have sought to reduce their exposure to private equity in the wake of last year’s housing finance market and subsequent leveraged loan credit crunch. Asset management businesses like the one Lehman had been shopping are more in vogue as acquisition targets than private equity firm at the moment. Hence, the more probable option is that Lehman Brothers Merchant Banking executives like leveraged buyout veteran and global merchant banking head Charles Ayres, a former Deutsche Bank private equity executive, will run a standalone investment firm in the wake of Lehman’s Chapter 11 filing. That’s been the tack taken by another bank leveraged buyout investment unit overseen by a troubled banking parent, Bear Stearns Merchant Banking, when JPMorgan assimilated Bear Stearns. It’s also been the path taken by many former banking executives since the buyout industry’s earliest days. The more well-known examples involve a former Lehman chief executive and ex-Lehman M&A chief: Peter Peterson and Stephen Schwarzman, respectively. Peterson and Schwarzman, who began his finance career at Lehman, set up the Blackstone Group in 1985 with a secretary. The pair followed the trail blazed nine years earlier by former Bear Stearns bankers Jerome Kohlberg, Jr., Henry Kravis and George Roberts with the launch of Kohlberg Kravis Roberts. If the success of these two alternative asset behemoths offers any indication, there may be a bright spot in the Lehman crash, particularly for the executives enmeshed within the bank’s merchant banking group. After all, what’s old is often new again. Kelly Holman kelly.holman@sourcemedia.com
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DEALSEA Drops Take Two BidWithout enough time to capitalize on this holiday season’s video game rush, the video game publisher’s walk away from the smaller gem prompts questions. Landmark Communications’ Divest Goals UncertainLandmark Communications has completed the sale of its crown jewel, The Weather Channel, to a consortium of buyers was good news for sellers; but it remains to be seen whether the Virginian media company will meet objectives of selling print assets by the close of the calendar year. An individual familiar with the company’s sale process said it is “trying [its] best” to close deals by year-end 2008, as the firm had planned, but could offer no confirmation that this goal would indeed be met. As this arbitrary deadline nears—it is not binding—potential buyers might find opportunities in print assets they felt were overvalued earlier. Industry sources have said Landmark, which embarked upon a divestiture bonanza in January, has had difficulty shoring up the necessary interest to run auctions and return offers at a rate that would be satisfactory to sellers. Should print assets—hampered by both declines in advertising and fewer readers—continue to be held by the company, it remains possible that Landmark will continue to run them, although this is not likely. Landmark is still seeking bids for four major daily newspapers: two in Virginia, one in North Carolina and another in Maryland. The conglomerate also owns more than 120 community and special interest publications across 16 states. The disbanding, privately-held company also runs marketing outfit Dominion Enterprises as well, which was once part of a joint venture with Cox Communications, until two years ago. Harbinger Seeks Larger Cleveland Cliffs StakeHarbinger Capital Partners, the activist hedge fund also noted for its sizeable stake and demands to reorder the New York Times Co., is pushing Cleveland Cliffs shareholders to reject a deal between the mining company’s bid for Alpha Natural Resources and seeking a larger stake. Calling the Cleveland Cliffs-Alpha deal “too risky” in a federal filing Friday, Harbinger told shareholders that they seek to build a stake up to one-third of the company’s voting shares. It is not yet clear whether Harbinger would be successful in blocking the Alpha deal with a 33% stake. Harbinger is represented by Okapi Partners, a proxy solicitation service. Harbinger, without board approval, has already acquired more than 10% of Cleveland Cliffs’ voting shares. While the hedge fund denied in its statement that it is seeking control of Cleveland Cliffs, Harbinger said “we believe the most promising route to realizing the potential of our own investment is to ensure that the company pursues those strategic alternatives that maximize value for all shareholders.”
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FIRMSAdvent Raises Japan FundAdvent secured $550 million from limited partners for new Japanese investment partnership. Accel-KKR Closes $600 Million FundAccel-KKR, a Menlo Park, Calif.-based private equity firm, said Tuesday that it has closed its third investment fund at $600 million. The Accel-KKR Capital Partners III fund, a middle-market technology-oriented limited partnership, exceeded its initial target by $150 million. Although the firm did not identify the fund's investors by name, its limited partners included college and university endowments, corporate pension plans, foundations, insurance companies, investment advisors, state and government retirement systems and family offices. Accel-KKR will invest capital from the fund in buyouts and recapitalizations of private and public technology companies in small take-private deals and divestitures from larger companies. The fund will typically invest in businesses with revenues ranging from $15 million to $150 million that offer “differentiated products, competitive positioning, and a demonstrated track record of growth,” ranging from software to Internet technologies and information technology-enabled service providers. Berkery Noyes Opens London OfficeInvestment bank Berkery Noyes added to ranks, hiring former ThomsonReuters CFO Nigel Harrison as a senior managing director in its London office. The appointment represents the firm’s first hire in the UK. During Harrison’s time at ThomsonReuters, 25 years, the company completed over 700 acquisitions and 200 divestitures. Prior to serving as CFO, Harrison was an executive vice president and a director at Thomson, which merged with Reuters earlier this year. Since leaving, Harrison has independently managed M&A transactions for privately held companies and served as a founder and senior executive in a number of startups, according to the Berkery Noyes announcement. At Berkery Noyes, Harrison will be counted on to work with existing clients based in the UK and Europe and also source new clients within the same region. He will also work with Berkery Noyes’s New York office on cross-border deals involving European companies.
Please contact Naz Bayazit to inquire about advertising opportunities with this e-newsletter. Naz.Bayazit@sourcemedia.com.
PEOPLEHIG Capital Appoints New MDThe private equity firm brings on board a retail veteran as the industry is coming increasingly ripe for bargain buyers. FBR Capital Markets Adds Two VetsFBR Capital Markets bolstered its technology, media and telecom shop with the appointment of two industry veterans, it announced Thursday. Kevin D. Cook joins FBR as a managing director for its tech, media and telecom investment banking group. He comes to the organization after having gone through Credit Suisse First Boston, Donaldson, Lufkin & Jenrette, Cowen & Co., and, most recently, Wachovia. Also, Heath P. Terry joins the tech, media and telecom team as a senior vice president and senior analyst. Terry comes to the organization after having covered the Internet, media and entertainment services sectors at Credit Suisse. Brookwood Financial Grows By TwoBrookwood Financial Partners has hired James Cronin and Stephen Winsor as financial analysts in the firm’s Acquisition Group. Cronin and Winsor will provide analytical support throughout Brookwood’s operations including sourcing and due diligence of real estate acquisition opportunities, asset management and disposition of assets. Prior to joining Brookwood, Cronin served as an Associate for the Real Estate Investment Banking Group at Bear Stearns from 2005 to 2008. Prior to joining Brookwood, Winsor worked at McKinsey & Company, where he served as an analyst in its Construction and Real Estate Group. Wynnchurch Adds Two New MembersWynnchurch Capital has hired Michael Teplitsky as a senior associate and Greg Gleason as an associate. Previously, Teplitsky was an associate at Lime Rock Partner. At Lime Rock, Teplitsky concentrated primarily on the oilfield service industry. Prior to joining Wynnchurch, Greg Gleason was a financial analyst at Houlihan Lokey in Chicago, where he was a member of the Global Industrial Group. His experience there includes mergers and acquisitions, strategic-alternatives assessments, leveraged ESOP transactions, solvency opinions, fairness opinions and general business valuations. KKR Infrastructure Effort Gets BiggerSimon Hipperson has joined the Kohlberg Kravis Roberts & Co infrastructure investment team. Hipperson, who will be based in London, is the former President and Chief Executive Officer of Skanska Infrastructure Development, a unit of Skanska, an international construction firm. Prior to becoming CEO of Skanska Infrastructure Development, he was executive vice president responsible for Public Private Partnerships of sister building and civil construction company Skanska UK PLC from 2002 to 2004. | |||||||||||
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