The price tag was less than one would have liked, but these are desperate times for sellers of financial assets. Lehman Brothers secured a sale of its crown jewel investment management division for $2.15 billion in a sale to private equity buyers.
When Lehman Brothers first proposed a sale weeks ago while still a solvent company, the price tag was estimated at $4 billion. In August, those same assets would have fetched $7 billion.
With most of Lehman’s core assets now sold, the only thing remaining for the company is liquidating assets in an orderly fashion as the 158-year old firm heads for the dustbin along with other former captains of Anglo-American finance like White Weld, Dillon Read, First Boston, Kidder Peabody, SG Warburg, and Morgan Grenfell (a firm for which I was once employed).
Bain Capital and Hellman & Friedman agreed to acquire Neuberger Berman, the crown jewel of Lehman Brothers Holdings, for $2.15bn. The deal comes weeks after a sale could have helped Lehman avoid collapse.
The wealth management firm will become the centrepiece of a new company called Neuberger Investment Management, with more than $230bn in assets.
George Walker, who was in charge of investment management for Lehman Brothers, will serve as chief executive of the firm, and Joe Amato will head up Neuberger Berman, the firm’s largest operating unit, an announcement said.
The portfolio managers will own a significant stake in the company. One concern of potential buyers was to retain the managers, who have seen the value of their equity holdings in Lehman drop. There is “a powerful alignment of interest between our clients and our people”, said Marvin Schwartz, one of those managers.
In an indication of just how moribund the credit markets remain, the Neuberger portfolio managers and the two private equity firms are putting up cash for the acquisition.
The announcement was not clear about the fate of all the operations that were part of Lehman’s asset management division. The transaction does not include certain hedge funds or Lehman’s direct private equity and real estate investment businesses.
The deal underscores how quickly the value of even the most desirable pieces of Lehman Brothers plummeted as the firm imploded. Bain and Hellman & Friedman were among the private equity bidders that originally sought the asset management arm. The group also included Blackstone, Carlyle and Kohlberg Kravis Roberts & Co.
Bidders considered making offers three times as great as the price Bain and Hellman & Friedman paid. In mid-August, a month before Lehman collapsed, Carlyle, for example, was prepared to pay $7bn and give Lehman the right to buy the operation back.