The Appian Group, a firm formed by Stephen Norris-the co-founder of The Carlyle Group-has aborted fund raising for its $500 million buyout fund and will wait until it either has found an anchor sponsor or has added new partners to the firm before tyring again, Mr. Norris said.
The Washington, D.C.-based firm in late 1997 launched Appian Equity Capital, L.P. to target deals in several industries, including health care and defense, and to invest as much as 25% of the fund in public companies from which Appian would look to exit in five years. The group offered better-than-market rates of a 1.3% management fee and a 9% preferred return (BUYOUTS Jan. 12, 1998, p. 3).
Mr. Norris said Appian could have wrapped the fund at $150 million-less than one-third of its original target-but that would not have provided enough capital for the group’s investment mandate.
Like buyout professionals such as Tully Friedman, co-founder of Hellman & Friedman who started talking to L.P.s in early 1997 about raising a fund but did not receive many commitments until he added several partners and renamed the group Friedman, Fleischer & Lowe LLC, and Jerome Katz, co-founder of Charterhouse Group International, who has taken almost two years to raise his own fund and changed the group’s name from Jerome L. Katz Partners to EntreCapital Partners to showcase a larger team, Mr. Norris found it difficult to raise a debut effort with only himself as the main drawing card.
Mr. Norris was a co-founder of The Carlyle Group and left that firm in 1996 to start Appian. He then recruited five principals-including Michael McEnearney, a former vice president from Carlyle.
“I came to the conclusion that to put together a buyout firm you need a few guys that have a mix of backgrounds and, as a result, I’ve been holding discussions with people about joining our group.”
Former Secretary of State Lawrence Eagleberger also was enlisted as an adviser. However, the fund did not generate great interest in the investor community. “I came to the conclusion that to put together a buyout firm you need a few guys that have a mix of backgrounds and, as a result, I’ve been holding discussions with people about joining our group,” he said, adding that he would likely launch a fund again when he finds the right general partners.
Looking for an International Backer
Mr. Norris also said his firm has been talking with a Dutch insurance company he declined to name about its becoming the chief backer of an Appian fund. He said the group would raise capital again and hire new partners if it reached an agreement with the Dutch company. Meanwhile, Mr. Norris, who formerly worked at Marriott International, and two of Appian’s principals-Mr. McEnearney and Michael Thurmond-have helped Marriott form Capital Hotel Partners to buy existing Marriott hotels. To fund the venture, the firm last month launched Capital Hotel Partners, L.P., setting a $250 million target (BUYOUTS Feb. 22, p. 3).