Fogg Preps Fund Minus Ex-Partner –

WESTBURY, N.Y. – Joseph Fogg in May launched his first private equity fund, seven years after leaving his position as head of worldwide investment banking at Morgan Stanley & Co. He is doing so at the same time his former partner, Jeffrey Freed, has joined a new group that also is raising a debut effort.

In the early 1980s, Mr. Fogg was known as the wunderkind who helped lead an explosion in mergers and acquisitions activity. He worked his way up at Morgan Stanley to lead one of The Street’s first M&A departments and was behind more than 200 deals worth more than $100 billion, including the $13.2 billion SoCal-Gulf Oil merger that in 1984 was the biggest deal of its time. Mr. Fogg became one of the biggest brokers in the M&A world, completing deals such as this when he was only in his mid-30s.

Mr. Fogg quietly left Morgan Stanley in 1992 to make direct investments with his own money. In 1995, he hired Mr. Freed from Oak Hill Capital Partners, Robert Bass’ investment vehicle, to help develop a track record and then launch a fund.

“My plan always was to establish a track record and get myself comfortable with a team that I felt comfortable raising money with,” Mr. Fogg said.

Going Separate Ways

His plans changed last year when the two professionals had a falling out, sources said. Messrs. Fogg and Freed declined to comment on the reasons for Mr. Freed’s resignation. The two men made about 10 investments together, mainly in the information products and services industry, committing $150 million in equity. Their investments included MGC Communications, a local exchange carrier, and Gray Peak Technologies, a network services integrator.

The two former partners now are following through on their plans to raise a fund, only not together.

Mr. Fogg last year hired James Schubauer – a former principal at First Atlantic Capital and Rosecliff, the investment vehicle of Peter Joseph, who died last year – to be president of his private equity vehicle, Westbury Capital Partners. According to Mr. Schubauer, his decision to depart First Atlantic was based on the firm opting to target larger buyouts; First Atlantic currently is raising Atlantic Equity Partners III, L.P., which has a $350 million target. The firm’s last fund garnered $81.5 million.

Westbury’s team is rounded out by Chief Financial Officer and Principal Richard Sicoli and Principal Da Kim.

In the next several weeks, the Westbury, N.Y.-based firm plans to launch a fund that will look to raise between $50 million and $100 million from limited partners, as well as an undetermined amount of matching funds from the Small Business Administration’s Small Business Investment Company program. The final tally could reach as much as $175 million.

The partnership will target investments in the educational, business services, telecommunications, information technology, light manufacturing and Internet sectors, and will target equity investments between $3 million and $9 million in companies with enterprise values of less than $50 million.

Mr. Fogg said he believes the best opportunities today lie in buying smaller companies. “There’s a lot of money chasing few deals: you do the math,” he said, adding that he also finds running small companies interesting because he gets to work directly with management.

He said the new fund would be his primary focus although he may not be at its offices on a daily basis. Mr. Fogg also helps Morgan Stanley manage Princes Gate, a $1 billion bridge loan fund, and is a political fund-raiser.

Westbury late last month closed an add-on for Confluence Holdings, the firm’s platform in the kayaking and canoeing industry, when it acquired Oak Creek, Colo.-based Wave Sport, a manufacturer of whitewater kayaks. Terms of the transaction were not disclosed.

Since acquiring Confluence last fall, the firm has made several add-ons, including Mad River Canoe, Wilderness Systems Kayaks, Sidewinder Whitewater and Wave Sport.

Freed At Last

Meanwhile, Mr. Freed late last month became the fourth managing director at Arlington Partners. Arlington was formed this year by Paul Stern, a former partner at Thayer Capital Partners, and Raymond Smith, a former CEO at Bell Atlantic Corp. The group is raising Arlington Capital Partners, L.P. and has set a $350 million target. BT Alex. Brown is the placement agent.

The Washington, D.C.-based group will invest in non-core assets of information technology companies ranging from telecommunications service providers to Internet and software divisions.

Arlington in recent months also added Robert Knibb, a former senior deal executive at MacAndrews & Forbes, as a partner.