Two Lees hit the market

Thomas H. Lee (the person) and Thomas H. Lee Partners (the firm) are both in market with new funds, which is certain to cause confusion among first-year LP associates.

The former is the latter’s namesake, and Lee went solo last year after a contentious split. His new firm—called Lee Equity Partners—is looking to raise $2.5 billion. It’s using CSFB as a placement agent, but Lee himself has been spotted fund-raising in both Boston and Chicago.

Prospective LPs say that Lee Equity Partners does not yet have a PPM, but that it already has secured a decent number of commitments from individual investors. They add that Lee is pitching the vehicle as an upper-middle-market sort of fund, and that it already has been a quiet minority investor in several deals. Its only publicly announced investment was as part of a consortium that agreed to acquire Universal American Financial Corp. (NYSE: UHCO) for more than $1 billion. Other participants in that deal include Capital Z Partners, Perry Capital, Welsh Carson Anderson & Stowe and Universal American CEO Richard Barasch.

Lee is hoping that investors will view Lee Equity Partners as a scaled down version of THLP, which is currently looking to raise $9 billion for its sixth fund. The firm said in March 2005 that it only would seek $6 billion, but has since upped the ante a couple of times. the firm continues to solicit new limited partners—in part because some prospective LPs were turned off by a since-abandoned commitment deadline.

Neither firm seems to be paying much attention to the other, but certain LPs believe that Lee himself has only returned to private equity in order to outperform his former partners.

“He obviously did not leave on good terms, and I’m sure that’s part of what’s driving him to get back into private equity,” says an institutional investor who knows Lee. “The question for people like me is whether or not he’s been away from the market for too long… It’s been quite a while since he’s led an LBO, or even been a major part of one.”

For THLP, the only outstanding question is whether $9 billion will be enough to compete in the mega-markets. Blackstone has upped its fund ante to $20.6 billion, Kohlberg Kravis Roberts & Co. is approaching that with its public and Asia funds and even fellow Boston shop Bain Capital is planning to supplement its existing $10 billion early next year. Some LPs say that THLP may actually end up again increasing its target, although others insist that $9 billion will be plenty so long as it continues to maintain its near-exclusive focus on North American deals. —Dan Primack