Hamilton Lane Changes Structure, Takes Fast Lane To Consolidation –

Hamilton Lane Advisors sold 40% of the company to outside investors last month, with an eye toward future industry consolidation. Hartley Rogers, former co-head of Credit Suisse First Boston’s U.S. private equity department, led the purchasing syndicate and will become Hamilton Lane’s new vice chairman.

The Bala Cynwyd, Pa.-based gatekeeper began entertaining investment offers in mid-2002, when it engaged Morgan Stanley to develop and circulate a prospectus. Rumors immediately circulated that the entire firm was for sale, but Hamilton Lane CEO Mario Giannini said that the firm quickly decided it wanted to remain independent. “The book included the possibility that the entire firm could be for sale, because we didn’t want to turn away potential investors who may have been willing to take a bit less,” Giannini explained. “We ended up having groups that wanted to buy just a small piece, and others who wanted it all.”

Talks with Rogers began earlier this year, and final papers were signed last month. The deal includes a 40% stake originally held by unnamed selling shareholders, plus Giannini and Leslie Brun, chairman and founder of Hamilton Lane. Not included was a 25% stake held by French banking concern Credit Lyonnais, which Giannini said was once on the table. Also involved in the deal is an employee option plan that eventually could net participants up to 20% of company ownership, which would be diluted evenly across the Rogers group (40% pre-option, 32% post-option), Credit Lyonnais (25% pre-option, 20% post-option) and Giannini and Brun themselves (35% pre-option, 28% post-option).

“We’ve looked at this industry for 13 or 14 years, and we are witnessing what we feel is a consolidation,” Brun said. “We wanted to position ourselves as a firm able to take advantage of that, whether it’s organic growth or growth through acquisition. I think we’ve now done that by adding a complementary group of management and operational skills with [Rogers], and he also has a large relationship network and access to direct and indirect capital that could affect our future plans.”

It’s not yet clear exactly what those plans may be, and both Brun and Giannini were quick to say that Hamilton Lane has neither formulated an acquisition strategy nor looked at individual acquisition targets. “It’s just our general view that opportunities may arrive in the future, and that it’s important to be in a position to take advantage of them,” Giannini explained. He added that the firm would maintain its traditional focus on fund advisory, fund-of-funds management, select co-investments and secondary purchases. He declined to comment on Hamilton Lane’s fifth fund-raising effort, which has held several rolling closes but will not finish until sometime next year.

As for Rogers, he will serve as an active vice chairman, with a hand in the firm’s investment, sales and marketing areas. He also will maintain his affiliation with Aries Advisors LLC, which is a sub-advisor for the residual portfolio of the $2.74 billion CSFB Equity Partners fund. Prior to joining CSFB, Rogers was a managing director with Morgan Stanley, where he managed the Princes Gate family of private equity funds.

“When DLJ was bought by CSFB, the fund I was with stopped making new investments, so I was just tending to existing investments,” Rogers said. “I still do some of that with a piece of my time, but I was looking for something new, and I’m particularly interested in the business development, strategic focus and marketing aspect of what I’ll be doing [at Hamilton Lane].”

In addition to Rogers, the buying syndicate also includes select Hamilton Lane employees, former Morgan Stanley managing director O. Griffith Sexton and Cascade Investments LLC, the investment firm of Microsoft Corp.’s Bill Gates. As part of the investment, Griffith and Cascade’s Martin Nelson will join the Hamilton Lane board of directors.

Founded in 1991, Hamilton Lane has initiated more than $26 billion in commitments on behalf of its clients, which include the Los Angeles Fire & Police Pension System, the California Public Employees’ Retirement System, the Florida State Board of Administration, the New York State Common Retirement Fund, Sunoco Inc., Textron Inc. and the United Food & Commercial Workers Union. It currently has $4.7 billion under management devoted to private equity investments.

No deal terms of the investment have been disclosed.