Shansby Loses Pro, As Fund III Wraps –

Only weeks before wrapping a $150 million buyout fund, the only principal at The Shansby Group has resigned, leaving partners Gary Shansby and Charles Esserman at the helm and raising questions about the depth of personnel at the firm.

Donald Stanners, who had been responsible for sourcing deals, left the firm last month, possibly to embark on a joint venture in private equity with another former Shansby professional. The Shansby Group does not consider the change a material event and has not yet informed some of its limited partners, said General Partner Gary Shansby. He described the timing of the departure as unfortunate.

“I said to Don that this comes as a shock to me. But, I don’t think Don’s resignation impacts the partnership,” he said.

The core of the group remains the same as it was prior to the launch-comprising Mr. Esserman and Mr. Shansby. Prior to Mr. Stanners joining the group, Mr. Esserman originated much of the deal flow and now likely will return to that role, industry sources said.

Mr. Shansby said Mr. Stanners was excellent at finding deals but the rest of the group also sourced investments, and will continue to do so.

Near the time of Fund III’s launch, the group added Mr. Stanners and Keith Lively to answer L.P. concerns over the amount of turnover at the firm (BUYOUTS Feb. 24, 1997, p. 3). Mr. Stanners had been a managing director in the commercial finance group at GE Capital Services from 1993 to 1996 and had started its merchant banking business on the West Coast.

Mr. Lively had been chief executive of Famous Amos Cookies, a Shansby portfolio company. The firm had intended to name Mr. Lively its third partner after Fund III was wrapped, but Mr. Lively instead resigned in 1998 in the midst of fund raising.

A History of Lost Personnel

In the mid 1990s, The Shansby Group suffered a string of departures. Kenneth Diekroeger left to join American Industrial Partners, J.B. Handley resigned to become a partner at Swander Pace Capital, and Partner Oliver Mading departed to start his own business.

One L.P. from Fund II who did not sign on to Fund III and declined to speak on the record said the most recent personnel move is not one that causes alarm because turnover is nothing new at the firm.

In the wake of the latest departures, several industry sources who follow The Shansby Group questioned if the two partners alone could properly invest a $150 million fund when the same team last invested only a $70 million partnership, TSG Fund II, L.P.

The firm now is looking to replace Mr. Stanners, Mr. Shansby said.

After 18 months of fund raising, the group has scheduled a final close for TSG Fund III, L.P. at more than $150 million. The firm in June held a first closing on $100 million. It had launched the partnership with a $150 million target (BUYOUTS Sept. 15, 1997, p. 6). The San Francisco-based Shansby Group has invested $15 million from Fund III.

Ex-Shansby Partners Go Solo

Only two years after joining The Shansby Group, Mr. Stanners has begun talking to Mr. Lively about forming their own private equity partnership, Mr. Stanners said.

Like The Shansby Group, the new firm would target consumer product companies. However, unlike their former employer, the partners would pursue investments in companies that are having operational difficulties, Mr. Stanners said.

Mr. Shansby said he believed Mr. Stanners may have resigned because the firm decided against making some of the investments that Mr. Stanners had recommended.

For his part, Mr. Stanners said he resigned because he wanted to manage companies that had operational challenges. His departure from the firm was on good terms, he added.

Fund III’s Humble Beginnings

The Shansby Group has invested in two buyouts from Fund III: Met-RX, a nutritional supplement manufacturer, a deal that Mr. Esserman sourced; and the Cutex brand nail polish remover from Carson, which Mr. Stanners sourced, Mr. Stanners said.

Last year, The Shansby Group added two vice presidents to bolster its ranks, Jamie O’Hara, formerly a senior consultant at Bain & Co., and Alex Panos, previously an associate in the M&A department at Bear, Stearns & Co.