Theodore J. Forstmann
|Theodore J. Forstmann|
|Born||Theodore Joseph Forstmann
February 13, 1940
Greenwich, Connecticut, U.S.
|Died||November 20, 2011
New York City, New York, U.S.
|Other names||Ted Forstmann
|Alma mater||Yale University
Columbia Law School
|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 billionaire, Forstmann was a Republican and a philanthropist. He supported school choice and funded scholarship programs for the disadvantaged. He led a tour of refugee camps in the former Yugoslavia.
Forstmann was born and raised in Greenwich, Connecticut, the second of six children. He was the son of Dorothy (née Mercadante) and Julius Forstmann, who ran a wool business that went bankrupt in 1958. Julius had inherited Forstmann Woolen Co. from his own father, one of the world's richest men. Forstmann had German and Italian ancestry. He 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
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.
Critic of junk bonds
While playing golf in the late 1980s, 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.
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.
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 May, 2011 Forstmann was diagnosed with brain cancer and received treatment at the Mayo Clinic. He died on November 20, 2011, due to complications from the cancer. The year he died, Forbes magazine put his net worth at US$ 1.6 billion.
- Forstmann Little — private equity firm, Ted Forstmann was one of the founders
- IMG — sports agency and management firm In which Forstmann was an investor.
- "Private equity pioneer Ted Forstmann dies at 71". Chicago Tribune. November 20, 2011. Retrieved 2011-11-20.
- Sandomir, Richard (January 12, 2007). "Forstmann Is Leader of the Pack at IMG". New York Times. Retrieved 2009-02-12.
- "Forstmann". American Spectator. November 23, 2011. Retrieved 2014-01-21.
- "Julius Forstmann, Led Woolens Firm". The New York Times. 1962-06-15.
- "Ted Forstmann, Rang Alarm on Junk-Bond Buyouts, Dies at 71". Businessweek. Retrieved 2011-11-20.
- Jay McInerney. "Other People's Money". New York Magazine. Retrieved October 11, 2014.
- Ross, Andrew (2011-11-20). "Theodore Forstmann, Private Equity Pioneer, Is Dead at 71". Dealbook.nytimes.com. Retrieved 2011-11-20.
- "Theodore Forstmann," The Week 23 November 2011
- "Barbarians at the Gate 2.0". The Economist. October 28, 2008.
- Carney, Brian M. (July 5, 2008). "The Credit Crisis Is Going to Get Worse". Wall Street Journal. Retrieved 2009-07-22.
- "Huge scholarship fund set up for private schools". CNN. June 9, 1998.
- The Daily Caller: "Ted Forstmann, RIP" By Larry Kudlow November 21, 2011
- BusinessWeek Ted Forstmann, Who Rang Alarm on Junk-Bond Buyouts, Dies at 71 November 21, 2011
- Futterman, Matthew (2011-05-04). "IMG's Forstmann Treated for Cancer - WSJ.com". Online.wsj.com. Retrieved 2011-11-20.
- Ted Forstmann profile Forbes.com. Retrieved April 2011.
- "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