Veritas Partners Want To Continue After Founder’s Death

McKeon’s death trips a “key-man provision,” meaning the firm’s investors will have to decide whether Veritas Capital can continue to make new investments. The New York-based firm manages seven companies from its third and fourth investment funds, and has about 46 percent left to invest from Fund IV, which closed with $1.225 billion in commitments from investors in August 2010. McKeon was also on the board of five of Veritas Capital’s seven companies.

Tim Fisher, a 63-year-old senior vice president at The Hillman Co., a family office that invested in all four Veritas Capital funds and was an early investor in firms such as Kleiner Perkins Caufield Byers and Kohlberg Kravis Roberts & Co., met with the firm’s remaining three partners at their offices in Manhattan on the morning of Tuesday, Sept. 11, after learning of McKeon’s death the previous evening. There they discussed, among other things, the health of the firm’s existing seven investments.

“It was very, very difficult and emotional,” said Fisher, who said he was a good friend of McKeon’s. “But we were focused on the issues.”

The firm’s remaining three senior partners want to continue the firm going forward, beyond managing out the seven investments, according to a source close to the firm. These executives are Ramzi Musallam, the most senior member of the firm who joined in 1997, helped launch its debut fund and is assuming a leadership role following McKeon’s death; Hugh Evans, a former partner at Falconhead Capital who joined Veritas Capital in 2005; and Buddy Polk, the firm’s longtime lead outside attorney who joined the firm in 2011. The firm has a total of 16 investment professionals.

Musallam, Evans and Polk are in the process of trying to meet with every Veritas Capital investor in September and October to discuss the firm, Fisher told Buyouts. A date for the LPs to vote on the firm’s future has not yet been set, he said. It has also not been decided what the firm will do about McKeon’s board seats, though Musallam shared a board seat with McKeon on the same companies.

The three executives declined to speak to a reporter but issued the following statement: “Bob was an extraordinary person, a consummate professional, and a cherished friend and colleague. We are all deeply saddened by this tragic loss and have his family in our thoughts. We are continuing to oversee operations at Veritas and at our portfolio companies, consistent with our regular practice and as Bob would have wanted.”

Fisher, for one, said he would support the remaining partners in their effort to continue the firm. Hillman’s investments in Veritas Capital’s funds, together with eight co-investments with the firm, have generated a net internal rate of return of 28.3 percent, Fisher said, making the firm one of Hillman’s “top-10 core private equity funds.” Though McKeon was certainly involved in deals, Fisher said that Musallam and Evans were intimately involved in helping to lead every deal over the last seven years.

“The portfolio is good, the CEOs—I know all of them—are extremely competent,” Fisher said. “If there were problems with the portfolio, it would make a challenging situation a lot more difficult. But in this instance, the best interest of all LPs would be to have continuity with the GP and to continue to manage the firm in its ordinary course of business.”

Meantime, Fisher, who was a member of the firm’s limited partner advisory board, said he has accepted the firm’s invitation to become chairman of that board. Until now, the board—consisting of the largest investors in Veritas Capital’s third and fourth funds—was an informal entity that didn’t hold meetings. But because of the circumstances it will hold an in-person meeting in the first week of October, Fisher said.

“Over the last four decades, we’ve experienced lots of private equity partnership organization changes,” Fisher said of Hillman’s long history of investing in private equity. “But it’s a very unusual event when a founding partner and leader of a private equity firm dies unexpectedly.”

Fisher said he last met with McKeon at McKeon’s office in June.

“He seemed normal. He’d had a stomach problem, so he was out of touch for a couple weeks, but he was definitely fine,” he said. “We were out of communication during August. I was on vacation, and I figured Bob was on vacation. I was planning on getting together with him after Labor Day.”

“It was totally unexpected,” Fisher said, when asked if, as a friend, he had noticed any indications that McKeon had been struggling.