Bear Stearns private equity units face uncertain future

Several private equity-focussed divisions of the investment bank, including Bear Stearns Merchant Banking, wait in limbo following an impending fire sale to JPMorgan, already home to two in-house direct investment initiatives.

Among the collateral damage from JPMorgan’s headline-dominating acquisition of Bear Stearns may be the collapsing financial giant’s private equity-facing businesses.

JPMorgan itself spun off a major private equity principal investment unit, previously called JPMorgan Partners, just two years ago following a standoff with One Equity Partners, another in-house private equity team. JPMorgan Partners has been reborn as CCMP Capital.

JPMorgan’s lead private equity platform now is One Equity Partners, led by Dick Cashin, which as of 2006 managed roughly $5 billion (€3.18 billion) in assets. Further complicating matters JPMorgan recently unveiled a new business, led by Bob Case in New York, called the Private Equity Principal Investments Business. That division has recently started investing a $750 million Asia fund.

Bear Stearns Merchant Bank (BSMB), Bear Stearns’ flagship alternative investment platform, currently manages more than $5 billion in capital. Led by John Howard and specialising in mid-market buyouts, BSMB’s last fund, MBP III, closed on $2.7 billion in 2006 and is currently managing eight portfolio companies.

BSMB is not the only Bear Stearns private equity division confronting such uncertainty. In the same boat are venture capital affiliate Constellation Ventures, which manages more than $450 million in venture capital and is led by Clifford Freidman; Bear Growth Capital Partners, an opportunistic mid-market buyout offshoot of BSMB, led by Paul Lattanzio; BDIRECT Capital, a fund of funds manager; and Bear Stearns Private Equity, a London-listed fund of funds manager which last week launched a rights issue to raise between $250 million and $300 million.  

Recently expanded placement agent group Bear Stearns Private Fund Group could also be affected by the buyout. The unit became part of Bear Stearns following the acquisition of Crane Capital, a well-regarded international placement agency, in February of last year. The unit is led by Paul Sanabria and Leo van den Thillart.

Former Institutional Limited Partners Association executive director Arlett Tygesen was tapped as managing director of the placement group last May.

Neither Bear Stearns nor JPMorgan could be reached for comment at press time.