Private equity firms Bain Capital Partners and Hellman & Friedman have agreed to acquire the asset management firm Neuberger Berman, and the fixed income and certain alternative asset management businesses of Lehman Brothers' investment management division, together to be known as Neuberger Investment Management, in partnership with portfolio managers, the management team and senior professionals.

The cash transaction with Lehman Brothers Holdings results in a valuation of $2.15 billion for the businesses being acquired. As part of the transaction, a new, independent investment management company will be created comprising businesses that managed more than $230 billion of assets as of August 31, 2008. Neuberger Berman will be its largest operating unit, and together with the fixed income and alternative asset management businesses, will form the core of this investment management company.

George Walker, global head of investment management for Lehman Brothers, will be chief executive of Neuberger Investment Management, and Joe Amato will continue to lead Neuberger Berman. The overall company, Neuberger Investment Management, will offer a broad suite of investment management products, including high net worth, separately managed accounts, institutional, fixed income, mutual funds and alternative assets including private equity. On a standalone basis, the business is reportedly profitable with attractive long-term growth prospects.

Bain Capital Partners and Hellman & Friedman have committed to an all-equity transaction in which they will be equal partners in the new company. Portfolio managers and management will also own a significant stake and will increase their ownership over time through an ongoing, equity-based compensation program. The transaction is expected to be completed by early 2009 and is subject to satisfaction of certain closing conditions, including the Lehman Brothers Holdings Bankruptcy Court approval.

The transaction includes the capabilities of Neuberger Berman (primarily equities products and services, mutual funds, and an emphasis on high net worth and institutional clients), Lehman Brothers Asset Management (fixed income, commodities, and quantitative portfolio management), and Lehman Brothers’ private funds investment group which includes the fund-of-funds businesses (both hedge fund and private equity), secondary private equity and co-investment as well as several startup private equity businesses including infrastructure and mezzanine debt.

Michael Odrich, head of private equity, and Tony Tutrone, head of the private funds investment group, will both join the company. The transaction does not include Lehman Brothers’ direct private equity businesses such as merchant banking, real estate, venture capital and MLP; certain hedge funds; or, with minor exceptions, the limited partner investments of Lehman Brothers Holdings in the acquired funds. It also does not include the minority stakes in hedge funds held by Lehman Brothers Holdings, for which it continues to assess strategic alternatives.

Mr Walker said: We are excited and energized about what this means for our clients and our employees. I can’t think of two better partners than Bain Capital and Hellman & Friedman, with proven track records of creating value in financial services, and asset management in particular. Our portfolio management and client teams are extremely enthusiastic about this next chapter in our history.