The Telegraph
Tuesday , November 22 , 2011
Since 1st March, 1999
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Buyout pioneer dies at 71

New York, Nov. 21: Theodore J. Forstmann, a colourful financier and philanthropist who helped pioneer leveraged buyouts, died yesterday at his home in Manhattan. He was 71.

The cause was brain cancer, his spokesperson said. Forstmann had been found to have a malignant glioma earlier this year.

Forstmann was among the first executives to use debt to acquire companies, fix them and then sell them for millions of dollars in profit.

Unusual for a financier, Forstmann Ted or Teddy to his friends was also a regular boldface name in the gossip pages. Over the last several years, he dated Indian-born Padma Lakshmi, the celebrity host of Top Chef and a model and the former wife of Salman Rushdie.

Beginning in the late 1970s, Forstmann pooled money from wealthy investors and large pension funds to back his acquisitions while taking 20 per cent of the profits, creating a business model that today is known as the private equity industry.

During the next three decades Forstmann bought, sold and turned around dozens of companies, including Gulfstream Aerospace, Dr Pepper and General Instrument.

Yet as buyouts grew and more and more debt was used to finance deals, Forstmann grew more cautious about the business. In an op-ed article in The Wall Street Journal in 1988, at the height of the buyout craze, he wrote: “Watching these deals get done is like watching a herd of drunk drivers take to the highway on New Year’s Eve.”

Forstmann had a brief romantic relationship with Diana, Princess of Wales, which he said later turned into a long-term friendship. He was often photographed arm in arm with a model or actress, including Elizabeth Hurley. He was later the godfather of her son.

In 2009, his relationship with Padma Lakshmi made headlines when she became pregnant with a baby girl, Krishna. Lakshmi was then dating both Forstmann and venture capitalist Adam Dell, spawning speculation on who Krishna’s father was. A DNA test showed Dell was the father but Lakshmi is known to have hoped he was not.

Forstmann never married and had a complicated view of the single life. In 1995 he told The Washington Post: “I find the prospect of being married more difficult than most people. I would be a difficult husband.” He added: “Maybe I’ll adopt some children. I’m not going to do nothing about this.”

Forstmann, who gave millions of dollars to charity, was also among the first philanthropists to push for voucher programs for education in the 1990s, leading to the movement by financiers to promote charter schools.

For 25 years he held a charity tennis tournament, known as “Huggy Bear,” at his summer home in Southampton, New York, raising over $20 million for children’s charities by bringing tennis pros like Martina Navratilova and Boris Becker to play against amateur donors.

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