| ||||||||||
| ||||||||||
— Capital Calls —
The jewel of the division is Neuberger Berman LLC, a wealth manager with $125 billion in assets. But the unit, which is expected to be valued at $3.5 billion or so, also includes private equity, representing disparate funds such as one publicly traded vehicle in Amsterdam as well as credit, real estate and hedge funds. It also houses Lehman's own midmarket buyout shop, Lehman Brothers Merchant Banking. Private equity firms have been the primary bidders for the asset management business. As of press time, Boston's Bain Capital LLC and San Francisco's Hellman & Friedman LLC were in the running, sources say, most likely bidding jointly.
The investment management subsidiary was not part of the bankruptcy filing -- only Lehman's holding company filed -- but the bankruptcy has made the sale process more fluid, one source says, and the unit, which also includes high net worth investment management, could be sold in its entirety. A sale of Neuberger Berman would be relatively straightforward. The situation with Lehman's own buyout, venture and hedge fund teams is less clear. Limited partners may be protected by key-man or change-of-control clauses and will want to keep the management groups intact, whether under new owners or as an independent firm, says the head of another buyout firm. One obvious outcome would be to spin off operations like merchant banking. As it happens, the global head of LBMB, Charles Ayers, knows the route to independence well. He was a veteran of Morgan Grenfell Private Equity (later known as DB Capital Partners), a unit of Deutsche Bank AG that spun out in 2004 as MidOcean Capital Partners LP. He left MidOcean shortly after its founding to take the reins of Lehman's in-house buyout operation. The bank's latest LBO fund, Lehman Brothers Merchant Banking Partners IV, closed in June 2007 with more than $3.3 billion, including a slice from Lehman itself. It has now invested about 25% of that. This year it bought healthcare laundry services provider Angelica Corp. for $300 million and took a 40% stake in Sram Corp., a high-performance bicycle components maker, for an undisclosed price. LBMB holds more than a dozen portfolio companies in its third fund. Limited partners may be concerned that Lehman won't honor its capital commitments to the fund and may worry that the fund will see fewer deals if divorced from a larger financial institution, the executive at the rival buyout firm says. But they will want to keep the management intact, he adds. "An LP wants to keep it going." That may be particularly true here, for LBMB has had an enviable track record, with a gross internal rate of return, before fees and carried interest, of 36.8% from 1989 to the end of 2006, and has made 2.3 times its invested capital, according to a report last year by the Pennsylvania Public School Employees' Retirement System, an LBMB investor. -- John E. Morris and V.T. Speaking of buyout shops narrowly escaping the collapse of an imploding bank and brokerage, Bear Stearns Merchant Banking -- which goes by BSMB these days -- has nearly finalized its spinoff from Bear Stearns Cos. and J.P. Morgan Chase & Co., which bailed out Bear Stearns earlier this year. "It's all over but for the champagne," says BSMB chief executive John Howard. His firm, which had been majority-owned by its principals, plans to separate completely from J.P. Morgan, he says, and has been operating as if it were independent. J.P. Morgan is now simply BSMB's largest LP, he says. The last steps are severing BSMB's IT functions from the bank's and finalizing a new name, which he couldn't disclose yet. The process should be complete by late October, he says. The branding effort proved to be much more difficult than simply picking a nearby intersection -- the fallback naming convention for buyout firm names (think Madison Dearborn Partners LLC). The obvious street names were spoken for, but that's not all. "Any Latin word that means anything is taken," Howard complains. "Every name from literature that you love."- J.E.M |
Amid the wreckage that is 
|
|
|
|
|
