JP Morgan CFO Jumps To Private Equity Group –

In another sign of the bank’s growing commitment to the private equity arena, J.P. Morgan & Co.’s chief financial officer, John Mayer, has resigned that post to run Morgan Capital Corp., the firm’s private equity arm.

Morgan Capital manages a portfolio of more than $1 billion and earlier this year began fund raising for the first of what will be a family of private equity funds (BUYOUTS Feb. 22, p. 7). The firm intends to commit a substantial portion of the equity to each of the funds, which will range in size from $500 million to $1 billion, while bringing outside L.P.s access to the funds.

The appointment of the former CFO to management of the private equity group represents the firm’s desire to have its former risk overseer manage what is an increasingly important area, said a source at the firm.

Brian Watson, the former head of Morgan Capital, will be returning to Australia to manage Morgan Capital’s Asia-Pacific activities. Peter Hancock, chairman of the firm’s risk management and capital committees, will add CFO to his duties.-George Moriarty

BT Capital Boosts Two McCown M.D.s

Just scant weeks after Douglas Brent departed the helm of BT Capital, the private equity investment arm of Bankers Trust Corp., to start his own firm, the group already has found his replacement.

This month Charles Ayres left his post as managing director at New York and Menlo Park, Calif.-based McCown De Leeuw & Co. to head up the direct and co-investment portions of BT Capital’s North American private equity group. Tyler Zachem, who worked with Mr. Ayres for the past six years and also was a McCown De Leeuw managing director, also will be making the jump to serve as a managing director in Mr. Ayres’ group.

The move by Mr. Ayres and Mr. Zachem runs contrary to the career paths of several G.P.s who in the last several years have opted to leave in-house investment funds to join or start independent buyout firms. Notwithstanding Mr. Brent, who earlier this month left BT Capital to form his own LBO group (BUYOUTS May 17, p. 1), last year saw the departures of Frank Sica, former co-head of Morgan Stanley Capital Partners who joined Soros Fund Management’s direct private equity investment program (BUYOUTS July 6, 1998, p. 3), and Lehman Brothers’ merchant banking lost Managing Directors Steven Berger and Gary Lawrence to pursue opportunities outside of investment banks (BUYOUTS June 22, 1998, p. 3; Jan. 26, p. 1).

Leveraging Investment Bank Contacts

Mr. Ayres said he was attracted to the top spot at BT Capital, which he officially will take next month, because of the opportunities afforded by the contacts of the parent investment bank. “Capital seems not to be the scarce commodity. The scarce commodities are ideas and deal flow,” he said, referring to his belief that BT Alex. Brown’s contacts in investment banking could open up deal-flow doors.

According to Robert Hellman, a McCown De Leeuw managing director, he and his colleagues were disappointed to lose Messrs. Ayres and Zachem; however, he emphasized that McCown De Leeuw still has six managing directors on its team. “Our problem, in terms of capacity, has not been on the deal-generation side with partners,” Mr. Hellman said, adding that the firm has a policy of only promoting individuals to managing directors from within. The firm recently added two senior associates and plans this year to add an additional senior associate, as well as three associates.

Although sources have speculated that some of the personnel departures from the private equity groups at investment banks were motivated by compensation issues, Mr. Ayres said BT Capital is run as a limited partnership that entails a standard carried interest split, even though all of the group’s capital comes from the parent bank.

According to Mr. Zachem, who only last year was promoted to managing director from principal (BUYOUTS Aug. 17, 1998, p. 12), both he and Mr. Ayres were disappointed to leave McCown De Leeuw but could not pass up the opportunity afforded them by BT Capital. “We really approached this as an investment and, with any investment, you want to be in the path of progress, which we really think we are,” he said. “We’ll have access to more capital and the ability to be a strategic partner or co-investor on some deals.”

Looking to Build the P.E. Program

According to Ted Virtue-president of BT Alex. Brown and head of Bankers Trust’s Americas investment banking operations, under which the private equity group now falls-the appointment of Messrs. Ayres and Zachem is the first step in establishing a more pronounced private equity business. “We are going to have an opportunity to be a much bigger player in the private equity realm. We are going to be as proactive in private equity as we have been in other areas of investment banking,” Mr. Virtue said.

While Mr. Ayres and Mr. Zachem will be working on both direct and co-investments at BT Capital, Mr. Virtue, at least for the time being, will oversee any private equity commitments made by the group.