Lehman’s European mezzanine team spins out

Neovara – run by Julian Entwisle, Joris Fletcher and Nathalie Romang – will manage Lehman’s fully invested 2004 fund and gear up to raise another vehicle.

Lehman Brothers’ European mezzanine arm has become the latest unit of the failed bank to spin out.

Led by three managing partners – Julian Entwisle, Joris Fletcher and Nathalie Romang – the team will rebrand as Neovara and manage the €800 million Lehman Brothers European Mezzanine Fund, which was raised in 2004 and is currently in realisation mode.

The founders will be joined by eight additional former Lehman colleagues, comprising two partners – Richard Holden and Jason Howard – three investment professionals and three support staff.

With the 2004 fund fully invested, fundraising is “definitely on the agenda”, says Fletcher. A fundraising process had been underway in 2008 but was scuppered when Lehman Brothers collapsed.

A target size for the next fund has not been decided and no placement agent has yet been lined up.

The spin-out has been given unanimous support from the 2004 fund's 30 institutional limited partners, Joris Fletcher told PEO. The consent process with the fund’s retail investors is ongoing. The Lehman Brothers estate, which is the largest single LP, will retain its stake in the fund.

The formation of Neovara follows last year's creation of Trilantic Capital, a firm that emerged from Lehman Brothers Merchant Banking. Trilantic, led by Charile Ayres, spun out from Lehman Brothers in April 2009. More than 300 limited partners in the merchant banking funds voted to approve the management spinout, which included $1.7 billion in “dry powder”.
Another private equity firm to spawn from Lehman's demise was the buyout unit of Alvarez & Marsal, the turnaround advisor that has guided Lehman Brothers through its bankruptcy. The firm recruited the founder of Lehman’s private equity business Michael Odrich to found Alvarez & Marsal Capital, which will target both troubled and stable companies.