Just a few weeks ago
With a press release that provided no reasons, Castle Harlan announced Aug. 5 that Wender had resigned from the 23-year-old firm, which has 18 investment professionals remaining. The announcement caught many people by surprise, including limited partners. “I am really shocked,” wrote one LP in an e-mail. Another LP, Catharine Burkett, of Camden Partners, said she was surprised but not overly concerned. “I think that the team [remaining] is pretty solid,” she said.
Interviews with Wender, 41, and other sources suggest that Wender had grown dissatisfied with his control over the future of the firm, including its investment strategy and ownership of its management company, which remains in the hands of Castle, 69, and co-founder Leonard Harlan, 74. “I have been in a process with our founders for many months to figure out a joint vision for the future of the firm,” said Wender, who spent 17 years at Castle Harlan. “It became clear to me that we weren’t going to get there, so it was time to move on.”
The resignation, effective immediately, does not trigger any key-person provisions in the new fund. Wender also resigned from his board seats on Castle Harlan companies. These include Baker & Taylor Corp., a distributor of books and music products, and Caribbean Restaurants, a franchisee of Burger Kings in Puerto Rico.
Wender’s departure marks a major shake-up at the New York-based shop, founded in 1987 by Castle, the former CEO of Donaldson Lufkin & Jenrette Inc., and Harlan, a former vice president at DLJ. The firm closed its fifth fund at $800 million in March, but only after a protracted fundraising effort in which at least one LP declined to re-invest in part over concern with the firm’s succession plan.
Castle Harlan has appointed Managing Directors Howard Morgan and Bill Pruellage, who joined the firm in 1996 and 1997, respectively, as co-presidents; it’s unclear whether the firm will make any new hires following the change.
The firm tried to address concerns about succession back in 2006, when it appointed Wender, the chief investment officer, to president. Wender took the lead of the firm’s Monday morning meetings. But Castle continued to run the firm as chairman and CEO. Two sources for a profile of the firm in Buyouts’s August 2 edition said they believed Castle continued to wield the most power at the firm, and some LPs said they were uneasy about the firm’s future when and if Castle steps aside. One likened the dynamic between Castle and Wender to that of Russian Prime Minister and former President Vladimir Putin, who is widely believed to be more powerful than the country’s president, Dmitri Medvedev.
Another LP said a Castle Harlan general partner told him a few hours before the announcement “that no explanation was given by Wender” for his resignation. That is at odds with Wender’s contention that the issues have been brewing for months, and with statements from the firm. Bob Marston, a spokesman for Castle Harlan, told Buyouts there may have been some “policy discussions” between Wender and firm management in recent weeks, and that Wender didn’t feel they were resolved. And Castle this week told peHUB, a sister Web site of Buyouts, “I’ve heard some talk that there were policy issues, but I think I’ve been totally flexible on those.”
Wender declined to speculate why Castle Harlan would tell LPs that he had given no reason for his resignation. When asked how he feels about LPs that signed on to Fund V thinking he would be there, Wender said, “I am confident that I’ve done everything I could possibly do for 17 years to move the firm forward. I’ve tried to operate with the utmost integrity and operate in the best interest of LPs.”
Castle Harlan, meanwhile, has about $680 million of dry powder from its latest fund to invest. “We are very excited to continue to build and grow Castle Harlan as a leading middle market buyout firm,” Morgan and Pruellage said in a joint statement.