Warren Hellman of Hellman & Friedman 2001 Dealmaker of the Year “Warren Hellman sets the standard for integrity.” SPONSORED BY: 4 FinancialDeals2001 sanfrancisco.bizjournals.com SF BUSINESS TIMES | MARCH 1-7, 2002 Dealmaker of the Year Hellman handily rises to top in private equity BY MARK CALVEY erated that trend. [email protected] Major tragedies trigger capital flows into the reinsurance sector because ellman & Friedman maintains a demand rises, and buyers of reinsurance low profile, belying its status as are more likely to sign on with new carri- one of San Francisco’s largest pri- ers, explained Jack Bunce, a managing H vate equity firms, one with its fin- director at Hellman & Friedman, who gers in an eclectic mix of investments serves on Arch Capital’s board. from the Nasdaq Stock Market to Another high-profile deal last year was Formula One racing. the $240 million the firm invested in the Perhaps the only thing more eclectic Nasdaq Stock Market, which gave it a than the firm’s investment portfolio is co- 10 percent stake in the electronic exchange founder Warren Hellman, who revels in that plans to eventually go public. his self-deprecating humor and down-to- “The challenge was trying to convince earth approach to business from his cor- the Nasdaq, sitting on $500 million, that NAJIB JOE HAKIM ner office in San Francisco’s financial dis- they needed our $240 million,” said trict. Matthew Barger, senior managing direc- Hellman and his colleagues credit the tor who oversees the firm’s daily opera- firm’s success to a narrow focus on com- tions. panies with solid franchises generating a Hellman & Friedman is helping the lot of free cash flow. All the better if the FIRM PARTNERS: Mitchell Cohen, Jack Bunce, Patrick Healy, Philip Hammarskjold. Nasdaq put the systems in place to oper- company’s in some type of transition, ate like a public company and meet the such as a change in ownership. PLAYING WITH A FULL DECK expectations of Wall Street, said Patrick The firm’s success in spotting opportu- Healy, the partner overseeing the invest- Over the years, Hellman & Friedman has invested in winner after winner: nities before others do, culminating in ment. several high-profile deals in recent Arch Capital Group Ltd.: In November 2001, Hellman & Friedman invested The Nasdaq investment is a marquee months, earns Hellman & Friedman the $225 million in Arch Capital, a publicly traded reinsurance and insurance company. deal that fits the firm’s focus on solid fran- San Francisco Business Times’ 2001 The financing was part of a larger $763 million financing that raised Arch’s total chises that others may have overlooked. Dealmaker of the Year Award. capital to more than $1 billion so the company could take advantage of a stronger For instance, the firm left rivals scratch- Since its founding in 1984, Hellman & reinsurance market following the Sept. 11 attacks. ing their heads when it spent $157 million Friedman has invested in 40 companies to pick up one of the nation’s largest bill- from its capital pool of nearly $5 billion. Nasdaq Stock Market Inc.: In May 2001, Hellman & Friedman invested $240 million to board companies, purchasing Patrick The firm is currently investing its fourth purchase a 10 percent stake in the electronic stock market that is preparing to go public. Media in August 1995. fund of $2.2 billion. The firm later sold the company, The firm has netted average annual Upromise Inc.: In October 2000, Hellman & Friedman invested $37.5 million in the renamed Eller Communications, to Clear returns of 26 percent for its institutional loyalty marketing program. Channel Communications after most of investors. Wall Street came to see the significant “Hellman & Friedman, and Warren Formula One Holdings: In February 2000, Hellman & Friedman invested $312 million in barriers to expanding the billboard busi- Hellman in particular, is one of our best the parent company of Formula One Holdings. The operator of the motor-racing ness given growing legislation against partners. In 2001, the firm was our No. 1 championship was acquired in May 2000 by EM.TV & Merchandising AG. new billboards. (San Franciscans will be partner in terms of financial return,” said voting this month on whether to curtail Rick Hayes, who oversees the California Digitas: In January 1999, Hellman & Friedman invested $100 million in Digitas, a direct billboard growth.) Hellman & Friedman Public Employees’ Retirement System’s and interactive marketing firm. In March 2000, Digitas completed an initial public offering. pocketed $540 million in cash and stock $20 billion private equity investments. Hellman & Friedman continues to hold more than half of Digitas. in the 1997 sale of Eller. Hellman and his team also have a “They are among the best at what they knack for knowing when to sell, Hayes Young & Rubicam Inc.: In December 1996, Hellman & Friedman invested $224 million do,” said Michael Hoffmann, a partner at said. For instance, the firm took the in the advertising firm. In May 1998, Y&R went public, and Hellman & Friedman sold its Probitas Partners, a San Francisco advis- unusual step of cashing out of Formula stake in 1998 and 1999. The ad agency was later acquired by WPP Group. er to institutional investors on private One three months after investing in the equity investments. “Warren Hellman, in company when a buyout offer came in PowerBar Inc.: In June 1996, Hellman & Friedman invested $19 million for a minority particular, sets the standard for integrity that was simply too compelling to ignore. stake in the energy-bar maker. Nestle purchased PowerBar in March 2000. in our business, and that extends Then it quickly sold the shares it picked throughout the firm.” up in Formula One’s acquirer, before Advanstar: Beginning in May 1996, Hellman & Friedman invested $177 million in the The rewards are large. Hellman earned they took a tumble. operator of trade shows and publisher of trade and business magazines. In October an estimated $30 million in 2000 alone, 2000, the firm sold Advanstar to DLJ Merchant Banking Partners. according to Forbes magazine, and has Piece of the pie amassed a net worth well up into the hun- Hellman decided to return home to San Eller Media Co. Inc.: In August 1995, Hellman & Friedman invested $157 million to dreds of millions. Francisco after spending the first part of buy billboard company Patrick Media, later renamed Eller Media Co., in partnership his career at the top of New York’s finan- with billboard industry veteran Karl Eller. In April 1997, the firm sold Eller Media to Getting involved cial circles, where he was president of Clear Channel Communications. While Hellman & Friedman’s team of Lehman Brothers. 21 investment professionals are scouring Hellman co-founded the private equity Voicestream Wireless Corp.: In June 1995, Hellman & Friedman invested an additional the country in search of investment firm with Tully Friedman, who has since $45 million in Western Wireless to finance its expansion into personal communications opportunities, Hellman himself is also left. It made its mark engineering the $1.8 services. Western Wireless eventually spun off the operations as an independent deeply involved in San Francisco’s politi- billion buyout of Levi Strauss in 1985. But company, Voicestream. Hellman & Friedman distributed its stake in Voicestream to limited cal and philanthropic circles. for the most part, the firm’s early activi- partners. Voicestream was acquired by Deutsche Telekom in June 2001. For instance, Hellman is chairman of ties were overshadowed by competitors’ the San Francisco Foundation, and serves high-profile moves, such as Kohlberg Franklin Resources Inc.: In August 1992, Hellman & Friedman led a group that on the advisory board at UC Berkeley’s Kravis Roberts’ 1989 buyout of RJR invested $100 million in the San Mateo mutual fund company so that it could Walter A. Haas School of Business. Nabisco for $31 billion. acquire Templeton, Galbraith & Hansberger Ltd., to form today’s Franklin Templeton He also serves on the boards of Levi Hellman & Friedman’s more recent Investments. In 1996, the firm sold its Franklin shares in the public market and Strauss, the Nasdaq and WPP Group, deals have garnered greater public atten- distributed additional shares to limited partners in 1997. which purchased the advertising firm tion, such as the $225 million invested in Young & Rubicam — another big winner Arch Capital Group Ltd. in November, Western Wireless Corp.: In July 1991, Hellman & Friedman invested $62.5 million for Hellman & Friedman. echoing a successful investment the firm in General Cellular, a financially troubled predecessor of Western Wireless. “If you’re not involved, particularly in made in the reinsurance industry in 1992 Western Wireless, which emerged from a 1994 merger with Pacific Northwest this community, which can veer off in all after Hurricane Andrew hit Florida. Cellular, went public in 1996, and the firm exited its investment by distributing kinds of strange directions, then what do Insurers’ ability to raise prices was improv- shares to its limited partners in 1999. you have to complain about?” said ing this year. The events of Sept. 11 accel- See HELLMAN, 17 SF BUSINESS TIMES | MARCH 1-7, 2002 sanfrancisco.bizjournals.com FinancialDeals2001 17 HELLMAN: Private equity firm with wide-ranging investments shows return of 30 percent on average CONTINUED FROM PAGE 4 Presidio by 4 a.m. He’s also a regular par- Hellman, whose family’s roots in the city ticipant and supporter of Ride and Tie, an go back to the late 1800s. equestrian and running relay. The financier offered some restrained “It’s a tremendous release,” he said. praise for the current city leaders, many “When you’re in business every day with of whom came into office with a strong a lot of problems that don’t get solved, anti-business agenda.