Following a string of investment write-offs, a protracted fundraising campaign and most recently, a scandal involving Connecticut state treasurer Paul Silvester, Thayer Capital Partners’ founder Frederic Malek is reportedly handing over the reins of his firm to junior partners.
In a story reported by The Washington Post, Malek confirmed that he will no longer lead deals or serve as managing partner at Thayer Capital, the firm he started back in 1991, and will change his title to chairman and founder. He is quoted as saying he intends to serve as “chairman and partner at Thayer for the rest of my life.”
The firm will most likely be led by partners Jeffrey Goettman, who joined in 1998, Daniel Dickinson, at the firm since 2001, and newest arrival Scott Rued, who arrived early last year.
Thayer capital has also hired two senior operating partners: James Forese, the retired chief executive of IKON Office Solutions Inc., who became Thayer's chief operating officer last year; and Richard Snell, former chief executive of auto-parts maker Federal-Mogul Corp., who also joined last year.
According to the article, Malek had already began playing a predominantly advisory role at Thayer Capital ever since Rued's arrival in 2003. Nevertheless, the partners do not expect Malek to vanish, as he commands powerful personal and professional relationships.
Malek has made a name for himself in Washington, DC politics and business over the years. Thayer Capital is one of the major private equity firms in the district and currently manages $1.5 billion in capital and invests in the industrial products and services industries.
Malek and his firm gained a different kind of notoriety in August through, when they were fined a $250,000 penalty to settle Securities and Exchange Commission charges related to the payment of an unusual finder’s fee.
According to an SEC statement, the penalty related to Thayer Capital’s failure to disclose to the State of Connecticut fees for a $75 million capital commitment that Silvester had sanctioned.
Acting on a ‘request’ from Silvester in 1998, Malek paid a total of $375,000 to William DiBella, described in the SEC document as a ‘friend and political supporter’ of Silvester. The DiBella fee was understood to be a ‘reward’ for the state’s capital commitment to a Thayer Capital fund, according to the SEC. In fact, the commission notes, Silvester actually increased his commitment to the firm in order to garner a better fee for DiBella, who funneled the money through his ‘consulting firm,’ North Cove Ventures.
Prior to these charges, Thayer Capital had also been experiencing a rash of partner defections as the firm experienced a strategy split between generalist investing and sector-focused investing. Part of the reason for the departures also had to do with a series of failed investments made with Thayer Capital’s Fund IV, an $880 million fund raised at the peak of the dotcom bubble in 1999.
As a result of poor returns and scarcity of funds following Sept. 11, 2001, Thayer Capital’s partners had also decided to stop raising money for its Fund V, which had been targeting $1 billion; by the time they gave up at the start of 2003, the partners had only managed to raise a third of the capital.
According to the Washington Post article, Malek expects Thayer to begin fundraising again for Fund VI next spring or summer, and expects that he will probably be involved in that process.