1997: Friedman Leaves Hellman

The LBO world has always had its share of ego-ruptured alliances, and lately things seem to be as hairy as ever. Buyouts uncovered a few weeks ago that turnaround shop Questor Management Co. is in the midst of winding down operations, while venture-buyout firm Garnett & Helfrich seems to have more than its share of turnover of late.

Ten years ago, Hellman & Friedman Co-founder Tully Friedman announced his plans to leave his namesake firm—ending a 13-year stint at the helm. His goal was to build a new firm and launch a fund targeting between $500 million and $700 million. According to a Buyouts article published on Feb. 10, 1997, Friedman’s departure from San Francisco-based Hellman & Friedman seemed to be linked to a desire for more control.

“He wants to run his own firm,” said John Pasquesi, then a Hellman & Friedman general partner. “This is a collegial place, but there are occasionally times when people look to senior authority, and that’s Warren [Hellman]. If Tully wants to be that person, the conclusion he came to is that he has to leave.”

And he did. At the pre-determined date of March 31, 1997, Friedman struck out on his own to co-found Friedman Fleischer & Lowe, a buyout and growth capital firm investing in U.S.-based and Canada-based companies with enterprise values of up to $500 million. The first fund closed on $350 million, according to Buyouts publisher Thomson Financial, below Freidman’s initial target range. But all was not lost. Its follow-up fund, Friedman Fleischer & Lowe Capital Partners II LP, topped out at more than double the size of its predecessor, raking in $750 million from limited partners in 2004.

The firm is chugging along. Just last month Friedman Fleischer & Lowe received early antitrust clearance by the FTC for its acquisition of reinsurance company Wilton Re Holdings Ltd. The firm has been an investor in Wilton Re since December 2004, when it helped capitalize the company alongside other buyout firms, including MMC Capital (now known as Stone Point Capital) and Vestar Capital Partners. Friedman Fleischer’s Fund II was listed as the acquisition vehicle.

Meanwhile, Friedman’s alma mater—Hellman & Friedman—is in the fundraising market with its sixth fund, Hellman & Friedman VI LP. As of the close of 2006, the firm had raised about $2.7 billion of its $8 billion goal, according to Buyouts data.