Theodore J. Forstmann

Theodore Joseph Forstmann
Born	(1940-02-13)February 13, 1940 Greenwich, Connecticut, U.S.
Died	November 20, 2011(2011-11-20) (aged 71) New York City, New York, U.S.
Nationality	American
Other names	Ted Forstmann Teddy Forstmann
Alma mater	Yale University Columbia University
Occupation	Private Equity Investor
Known for	Founder of Forstmann Little & Company Unique subordinated debt fund

Theodore Joseph "Ted" Forstmann (February 13, 1940 – November 20, 2011) was one of the founding partners of Forstmann Little & Company, a private equity firm, and chairman and CEO of IMG, a global sports and media company. A member of the Republican Party, Forstman was a philanthropist. He supported school choice and funded scholarship programs for the disadvantaged.

Early life

Forstmann grew up in Greenwich, Connecticut, the second of six children. His father, Julius, ran a wool business that went bankrupt in 1958. Julius Forstmann had inherited Forstmann Woolen Co. from his own father, one of the world's richest men. Forstmann was a graduate of Greenwich Country Day School and Phillips Academy. He then played goalie on the ice hockey team at Yale University where he was a member of Delta Kappa Epsilon fraternity. Forstmann later attended Columbia Law School where he earned a juris doctorate, which he financed through gambling proceeds.

Forstmann Little & Company

Forstmann, an attorney, founded Forstmann Little in 1978 with his younger brother Nicholas, and Brian Little. Forstmann's second brother, J. Anthony Forstmann, founded ForstmannLeff.

Under Forstmann's leadership, Forstmann Little & Company made 31 acquisitions and significant investments and returned more than $15 billion of profits to investors. In addition to IMG, some of the firm's investments include Gulfstream Aerospace, Dr. Pepper, The Topps Co., Stanadyne Corp., Community Health Systems, Ziff Davis, Yankee Candle, General Instrument Corporation, and most recently, Citadel Broadcasting and 24 Hour Fitness.

Career

Critic of junk bonds

While playing golf in the late 1980's, Ted Forstmann inadvertently coined the term for which he became best known. His golf partner asked Forstmann what it meant for a company to be taken over by a buyout firm. “It means the barbarians are at the gates,” replied Forstmann. The term became part of Wall Street lore and was connected inseparably to the private equity industry that Forstmann pioneered and flourished in. Forstmann was featured prominently in the book Barbarians at the Gate: The Fall of RJR Nabisco, as he and his company attempted to acquire RJR Nabisco. In the subsequent film adaptation, he was portrayed by actor David Rasche. The book portrayed Forstmann as a critic of KKR's Henry Kravis and his investment methods.

Forstmann's criticism of Kravis (and much of the rest of the financial industry during the 1980s) centered on the issuance of high yield "junk" bonds to finance mergers and acquisitions. (Forstmann referred to junk bonds as "wampum") When the junk bond market later fell into disfavor as a result of scandal, Forstmann's criticism was seen as prescient, as his more conventional investment strategy had been able to maintain nearly the same level of profitability as companies such as KKR and Revlon that built their strategy around high-yield debt.

Credit crisis

Forstmann accurately predicted the worsening of the credit crisis in July 2008, when most pundits believed the crisis had reached its peak. Forstmann argued that the excess of money pumped into the economy after the September 11 attacks in 2001 distorted the decision-making abilities of nearly everyone in finance. With an oversupply of money, bankers and other financiers took on more risk with less return. While this allowed many to make money for a time, eventually this risk accumulated, and the consequences led to the credit crisis.

Civic life

In 1995 Forstmann was given the "Patron of the Arts Award" by the National Academy of Popular Music at the Songwriters Hall of Fame induction ceremonies.

Forstmann dedicated significant personal resources to the cause of education reform. He was a prominent supporter of school choice. In 1998 he and friend John T. Walton established the Children's Scholarship Fund to provide tuition assistance for low-income families wanting to send their children to private school.

In February 2011, Forstmann became a signatory of The Giving Pledge.

He was an active member of the Republican Party.

Personal life

Although Forstmann never married,he adopted two boys in the 1990s after meeting them at an orphanage in South Africa: Everest and Siya.

Forstmann was a practicing Roman Catholic.

In December 2006, newspaper reports on the inquiry into the death of Diana, Princess of Wales alleged that U.S. intelligence agencies had bugged Forstmann's phone or plane and monitored his relationship with Diana. She and her sons were said to have planned to visit him in summer 1997, but British security reportedly blocked the visit over security concerns related to the bugging.

In May 2011, Forstmann was diagnosed with brain cancer and received treatment at the Mayo Clinic. Forstmann died on November 20, 2011 due to complications from brain cancer. He had a net worth of US$1.6 billion as of 2011.

See also

• Forstmann Little — private equity firm, Ted Forstmann was one of the founders
• IMG — sports agency and management firm In which Forstmann was an investor.

External links

• "The Inside Story of Ted Forstmann's Wild Ride at Gulfstream" - 1997 BusinessWeek article on Forstmann's transformation of Gulfstream Aerospace
• "A Latter-Day Warbucks, Helping Children" - 1999 New York Times article on Forstmann's efforts to improve education by giving school choice
• 2005 Forbes 400 entry
• 2008 Forbes 400 entry
• "Goodbye to All That" - 2004 New York Times article on Forstmann's planned retirement in 2006.
• Ted Forstmann's Bio
• Theodore J. Forstmann at Find a Grave
• Machiavelli and Mogul. Vanity Fair, January 2012