Private equity pioneer Thomas Lee dies at 78

Thomas H. Lee, a billionaire who pioneered private-equity deals and leveraged buyouts through a firm that bore his name, has died. He was 78.

Lee’s death was announced without details about its time or place or cause by a family spokesman, Michael Sitrick.

Lee ran Boston-based Thomas H. Lee Partners from 1974 until 2006, when the firm had $12 billion to invest after producing triple-digit returns on some of its deals. Lee quit and formed New York-based Lee Equity Partners, which created funds that focused on smaller deals for fast-growing companies.

Through both firms, Lee invested more than $15 billion in hundreds of transactions as of 2020. That included his best-known transaction, the 1992 purchase of Snapple Beverage Corp. After his firm bought Snapple for $135 million, investing only $28 million of its own money, Lee sold it to Quaker Oats Co. for $1.7 billion two years later after boosting revenue from $95 million a year to $750 million.

His Snapple return on equity was 334% after his firm took out $927 million from the sale, according to a 1997 Forbes profile. With profits like that, by 2022, Lee was worth $2 billion, according to Forbes.

Unlike most of his competitors, Lee was not ruthless about how he made his fortune, eschewing corporate raider tactics like radical cost cutting to hit profit targets.

“He’s that rare thing on Wall Street — a genuinely nice guy,” Forbes said in that 1997 profile. “He is also a real innovator in the deal business.”

‘ICONIC FIGURE’

Todd Abbrecht and Scott Sperling, co-chief executive officers at Lee’s former firm, now known as THL, said they were “profoundly saddened” by his unexpected death.

“Tom was an iconic figure in private equity. He helped pioneer an industry and mentored generations of young professionals who followed in his footsteps,” they said in a statement. “More importantly, he was a generous and gracious individual who cared deeply about his friends, his family, and his community.” 

Lee’s private-equity approach was to target mid-cap companies with growth potential that had revenue of $300 million to $3 billion. One of his favorite aphorisms was: You’re better off paying a steep price for a great company than getting a so-so company at a bargain price. 

[More: Hightower lands additional funding from Thomas H. Lee Partners]

Using that philosophy, one of his early successes was the 1985 acquisition of Akron, Ohio-based Sterling Jewelers for $28 million, most of it borrowed. He sold the company two years later for $210 million, producing more than $180 million in profits, according to Forbes.

Other deals at his first firm included General Nutrition Cos. in 1989. In 2005, he also partnered with other private-equity firms to buy Dunkin’ Brands, which franchised Dunkin’ Donuts and Baskin-Robbins ice cream shops, for $2.4 billion.

INVESTMENT FORMULA 

While de-emphasizing leverage, Lee stayed with his basic investment formula when he started Lee Equity, which typically invested $50 million to $150 million in a company. It invested in Deb Shops, a junior fashion retailer, took Edelman Financial Group private in 2012 and made a big bet on Papa Murphy’s International, a take-and-bake pizza chain.

Lee often stayed out of the limelight when deals were reported, according to Edgar Bronfman Jr., who worked with Lee to buy Warner Music Group in 2004. He said Lee’s philosophy was: You don’t have to win if you get everything you want. Let the other party have the social and press victories.

“Tom always focused on the business outcome for his investors, not his personal profile,” Bronfman told Bloomberg in 2014.

There were some flubs along the way, which Lee typically pointed out to potential investors when making a pitch on a new deal. A $500 million investment in 1999 in insurer Conseco Inc. soured when it sought bankruptcy protection three years later.

Lee’s firm was also rattled by its $507 million investment in Refco Inc., the U.S. futures and commodities brokerage firm. Refco filed for bankruptcy protection after it disclosed in 2005 that its chief executive had hidden $430 million in debt for years.

Lee was often seen chewing a cigar around the office, and he sometimes drew comparisons to the fictional private-equity banker Thomas Crown portrayed in the 1999 movie “The Thomas Crown Affair,” Businessweek reported in 2005. 

An avid art collector, Lee owned works by artists including Willem de Kooning and Jackson Pollock and was a trustee of Lincoln Center and the Museum of Modern Art, according to Forbes.

Thomas Haskell Lee was born on March 27, 1944, in Washington, to Herbert and the former Mildred Schiff. His father worked for the Shoe Corp. of America, founded by his father-in-law, Robert Schiff.

Lee attended Belmont Hill School near Boston and graduated from Harvard College in 1965 with a bachelor’s degree in economics.

He went to work as an analyst in the institutional research department of L.F. Rothschild in New York. After a year, he switched to the First National Bank of Boston, where he spent eight years. He rose to vice president by 1973, specializing in lending to technology firms.

Using $150,000 from an inheritance and a loan from his brother, he started Thomas H. Lee Partners in 1974.

His first wife was Barbara Fish. They divorced in 1995 after having two children, Zach and Robbie, in 27 years of marriage. He later married Ann Tenenbaum. They had three children: Jesse, Nathan and Rosalie.