Several months after leaving the White House as Chief of Staff, Erskine Bowles has joined Forstmann Little & Co. as a partner and has re-joined Carousel Capital, the firm he formed in 1996.
He said he has no plans to go back to politics-dispelling rumors that he is planning to run for Governor in North Carolina-and expects to spend the rest of his career in private equity.
“I never envisioned myself as a politician. I think you can assume I’ll be in public service; I’ll find some things that interest me and are good for the community. But, I don’t envision myself becoming a public candidate again,” he said. “My experience in forming Carousel is clearly an indication that private equity is where my interest lies.”
Mr. Bowles was Chief of Staff in the White House from November 1996 to November 1998. Before going to Washington, he helped form Carousel Capital in 1996, a buyout firm that focuses on middle-market companies in the Southeast. Mr. Bowles said he will now split his time between Forstmann Little and Carousel.
Forstmann Little will source smaller deals to Carousel. In forming a partnership, Forstmann Little committed $50 million to Carousel and some of that capital will come from its $3.2 billion Forstmann Little VI, L.P. Forstmann Little will charge its L.P.s management fees once for that investment, a spokesperson from Forstmann Little said.
Carousel raised the $183 million Carousel Capital, L.P. in 1996 and the group has invested 70% of that fund. Mr. Bowles said Carousel would launch a new vehicle soon that will have a target of between $250 million and $300 million.
Mr. Bowles said he expects his return to private equity to go smoothly, even at Forstmann Little where he is new to the general partnership.
Forstmann Little has given Mr. Bowles a “significant equity stake” which it declined to reveal. Forstmann Little, despite its fund size, even now has only seven partners.
“I believe that everyone feels it was worthwhile to change the size of the pieces of the pie because we can increase the size of the pie,” Mr. Bowles said.
Public Service Versus Private Equity
Mr. Bowles believes he can find hard-to-locate deals. He bases this on his experience in Washington and as chairman and CEO at Bowles Hollowell Conner & Co. At the investment bank, he worked with Forstmann Little on some of its first buyouts.
Mr. Bowles was at the bank from 1975 to 1993. He then became administrator of the U.S. Small Business Administration, and Deputy Chief of Staff at the White House, before founding Carousel.
Sources who have worked with Mr. Bowles think he can help Forstmann Little in organization as well as in finding deals.
“He’s such a detail-oriented guy. His skill sets make him perfect to work with portfolio companies,” said Brian Bailey, a vice president at The Carlyle Group, who worked with Mr. Bowles at the SBA and in the White House.
Sources said they expect Mr. Bowles to be under a microscope from now on as people would want to be sure he is not using his Washington connections improperly.
“I think the real issue is he will eventually work on companies dealing with government issues and people will throw rocks at him,” said Todd Berman, who manages Chartwell Investments, a firm which has George Stephanopoulos as a board member.
“I’m sure he will be very, very careful and if anyone can handle it, he can,” Mr. Berman added.
Jumping on the Politico Bandwagon
Forstmann Little this month also announced it would be adding former House Speaker Newt Gingrich as a board member. Forstmann’s board already includes former politicos such as Henry Kissinger, Colin Powell, Donald Rumsfeld and George Schultz (BUYOUTS Aug. 31, 1998, p. 1).
Mr. Berman said the key to adding someone like Mr. Gingrich, as opposed to Mr. Bowles who has experience in private equity, is giving him key directions on how he can help the firm.