Having a strong brand in private equity helps attract deal flow. When the brand is your own name, the deal flow follows you, even when you quit the firm that bears your name.
Take the unique example of Thomas H. Lee, who last year parted ways with the Boston firm, Thomas H. Lee Partners, to found a new firm based in New York called Lee Equity Partners. Lee is noted for many deals, but perhaps his most famous success was Snapple, the beverage company acquired by Thomas H. Lee Partners in 1992 for $135 million and sold two years later to Quaker Oats for $1.7 billion.
Last year, through a mutual acquaintance, Lee was introduced to the owner of Tasti D-Lite, a New York-based purveyor of “frozen dairy dessert” products which “possess lower caloric and fat content than traditional ice cream offerings”, according to company literature. The entrepreneur behind the 34-store chain was eager to hook up with a group that could take the business to the next level, and was eager to speak to the man behind the Snapple homerun.
Lee brought to the negotiations Leonard Marsh, a founder of Snapple, as well as James Amos, who grew Mail Boxes, etc. into a major postal services franchise. Together, the executives mapped out a vision for Tasti D-Lite that saw the company's frozen treats being enjoyed well beyond the five boroughs of New York. Just as Snapple is marketed as being made from the “best stuff on earth”, Tasti D-Lite tells consumers that its low-calorie formula makes it the “No. 1 guilt-free indulgence”.
Lee is currently raising capital for what is expected to be a multi-billiondollar growth equity and buyout fund, and so Tasti D-Lite was too small for this vehicle. So he called his friend Ian Snow, a former Ripplewood Holdings partner who is now raising capital for a new middle-market buyout firm – SPG Partners. Lee will be an investor in the fund and is investing directly in SPG's acquisition of Tasti D-Lite.
For a deal junkie like Lee, sending a small deal to a friend and then coinvesting in it may be his No. 1 guilt-free indulgence.
BLACKSTONE GOES ON SELLING SPREE
Even before the ink was dry on the biggest buyout deal in history, private equity real estate firms were snapping up the properties being sold off by The Blackstone Group in the wake of its acquisition last month of Equity Offices Properties. Shorenstein Properties of San Francisco could reportedly be paying around $1.2 billion (€914 million) for EOP's office portfolio in Portland, Oregon. Blackstone also sold eight New York City skyscrapers to Macklowe Properties for $7 billion. Blackstone paid $39 billion for the office real estate investment trust after a protracted bidding war with a group led by Vornado Realty.
SEQUOIA MAKES 44X RETURN ON YOUTUBE
US venture firm Sequoia Capital made a return of roughly 44 times its initial investment in YouTube, the videosharing website sold to Google recently for $1.65 billion. The return was revealed in a recent SEC filing. The price paid by Google raised eyebrows because YouTube was less than two years old and had limited revenues. Sequoia was also an original investor in Google.
KKR-LED CONSORTIUM BACKS EDUCATION
A group of banks, hedge funds and investors led by Kohlberg Kravis Roberts agreed to buy Laureate Education, a Baltimore, Maryland-based operator of 24 private universities in 15 countries, as well as a growing online division, in January. The value of the transaction is about $3.8 billion (€2.9 billion). Other participants in the consortium include Douglas Becker, Laureate's chairman and chief executive officer, Citigroup, SAC Capital Management, Sterling Capital, SPG Partners, Makena Capital, Torreal, Southern Cross Capital, Bregal Investments and Caisse de depot et placement du Quebec.
GENERAL ATLANTIC IN OUTSOURCING DEAL
Greenwich, Connecticut-based global private equity firm General Atlantic has bought a $66 million (€51 million) minority stake in San Francisco-based outsourcing provider Service Source. Service Source provides support and maintenance revenue to hardware, software and healthcare companies. Its clients include Sun Microsystems and Hitachi Data Systems. Service Source has service centres in Denver, Houston and Dublin.
CARLYLE GETS INTO SKINCARE PRODUCTS
The Carlyle Group has agreed to buy philosophy, inc., a producer of personal care products, from a group led by the company's chief executive officer and founder Cristina Carlino. The value of the transaction, expected to close in the first quarter of this year, was not disclosed. Founded in 1996 and based in Phoenix, Arizona, philosophy sells skin care products, fragrances and cosmetics through television and retailers. Vendors include the home shopping channel QVC and cosmetics retailer Sephora.
GATES SEALS FOUR SEASONS BUYOUT
The family office of Bill Gates is leading a group of investors that will pay $3.8 billion (€2.9 billion) for Four Seasons, the luxury hotel chain. The Gates investment group, called Cascade, is teaming on the deal with Kingdom Hotels, owned by Saudi Prince Alwaleed Bin Talal and Four Seasons' chairman and chief executive Isadore Sharp. Four Seasons has 74 hotels and resorts in prime locations around the world.
CERBERUS IN $185M TV STATION DEAL
New York-based distressed giant Cerberus Capital Management has agreed to buy seven television stations from the media company CBS Corporation for $185 million (€142 million). Cerberus will acquire the CBS stations and their network affiliates in Austin, Texas, Salt Lake City, Utah, Providence, Rhode Island, and West Palm Beach, Florida. If the deal is approved, CBS will be left with 30 stations. Dick Reingold, a TV veteran, worked with Cerberus on the deal.
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