Forstmann Little & Company
| Company type | Private |
|---|---|
| Industry | Private equity |
| Founded | 1978 |
| Founder | Theodore Forstmann, Nick Forstmann, Brian Little |
| Defunct | May 2014 |
| Fate | Liquidated and ceased operations |
| Headquarters | New York City , United States |
Key people | Theodore Forstmann (lead partner until 2011) |
| Products | Leveraged buyouts, private equity investments |
Forstmann, Little & Company was a prominent American private equity firm that focused primarily on leveraged buyouts (LBOs). During its height in the late 1990s, it stood as one of the largest private equity entities worldwide. The firm concentrated its investments largely in the technology and telecommunications industries but faced significant challenges following the collapse of the internet and telecom market bubbles. After the passing of founder Theodore Forstmann in 2011, the company proceeded to liquidate its holdings and formally ceased operations in May 2014.
History
In 1978, Ted Forstmann established Forstmann Little & Company alongside his brothers Nick Forstmann and Brian Little, securing initial capital through relationships with industry leaders such as Derald Ruttenberg. Following the deaths of Brian Little in 2000 and Nick Forstmann in 2001, Ted Forstmann assumed the role of lead partner. Their other brother, J. Anthony Forstmann, participated as a limited partner.
Throughout its existence, the firm executed upwards of 30 acquisitions and investments, delivering profits exceeding $14 billion to its investors. Among its notable purchases were Gulfstream Aerospace, Topps Playing Cards, Dr Pepper, Stanadyne, and General Instrument. The company frequently enhanced the value of its portfolio companies by actively managing operations, exemplified by its hands-on stewardship of Gulfstream Aerospace before selling it to General Dynamics.
Nevertheless, certain ventures underperformed, particularly within telecommunications, including investments in McLeodUSA and XO Communications. In 2002, Connecticut initiated legal action against Forstmann Little to recover $125 million lost through these investments, culminating in a $15 million settlement. This lawsuit became a landmark case influencing legal disputes between private equity firms and public investors.
A pivotal episode in the firm's history was the 1988 contest for control of RJR Nabisco, where Forstmann Little's bid was ultimately outmatched by competitor Kohlberg Kravis Roberts & Co., an event famously depicted in Barbarians at the Gate: The Fall of RJR Nabisco. Additional key transactions included involvement with Revlon in 1985—resulting in the formulation of the "Revlon Duty"—and acquiring a 27% ownership stake in Citadel Broadcasting Corporation following its merger with ABC Radio in 2006.
In alignment with its strategic diversification efforts, Forstmann Little purchased sports marketing company IMG for $750 million in 2004 and acquired 24 Hour Fitness for $1.6 billion in 2005 to expand its portfolio across various industries.
Dissolution
The death of Theodore Forstmann in 2011 due to brain cancer marked the end of an era for the firm’s leadership. Subsequently, legal advisors from Akin Gump Strauss Hauer & Feld oversaw the firm's orderly dissolution through asset divestitures. A significant transaction included selling IMG in 2013 for $2.3 billion to William Morris Endeavor. The final major asset, 24 Hour Fitness, was sold for $2 billion to AEA Investors in 2014, effectively bringing Forstmann Little’s global business activities to a close.
External links
- Articles with short description
- American companies established in 1978
- Financial services companies established in 1978
- Financial services companies disestablished in 2015
- Private equity firms of the United States
- 1978 establishments in New York (state)
- 2015 disestablishments in New York (state)
- American companies disestablished in 2015
- Companies of the United States by year of establishment
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