AMERICAS NEWS: Emerging rivals

News last month that Gary Garrabrant had departed Equity International blindsided many within the industry. After all, few clues seemed to have been given that the chief executive officer would be leaving a successful firm he helped build since founding it with Sam Zell in 1999.

The unexplained departure has left many to speculate on the reasons. In an article last month, the Wall Street Journal called it a “management shake-up,” adding it was “unusual” and could cause problems. It also revealed that chief strategic officer Thomas McDonald had left the firm as well.

It was only in response to the newspaper’s enquiries that Equity International issued a statement at all, and observers were quick to point out that there was no mention of Garrabrant at all, fuelling further speculation about the circumstances of his departure.

Instead, Zell issued a statement that included a reminder that he held a majority stake in Equity International and also emphasised continuity within the firm’s business plan. “I have been the majority owner of Equity International since its inception 15 years ago, and I am actively engaged in the business,” he said in the statement.

Zell added that Equity International had “a deep well of expertise” to contribute during the transition. A spokeswoman for the firm did not specify a timeline for finding a permanent CEO.

One GP that spoke to PERE but preferred not to be identified said: “It is really unfortunate as they built a great business together.” He added that Garrabrant was “broken up” about the development.

With Zell taking the reins following Garrabrant’s departure, the firm plans to continue focusing on opportunistic investments in emerging market platforms. “I believe that the emerging markets continue to represent outstanding growth, demand and opportunity,” Zell stated.  

Indeed, PERE understands that no deals that currently are in the works are being put on hold and that the firm intends to fulfill all of its commitments on behalf of its current fund, Equity International Fund V, which closed on $650 million in equity commitments last fall. As it stands now, half of Fund V is either invested or committed, suggesting the firm might be on the fundraising trail again sooner rather than later and providing a natural time for senior management to contemplate their long-term positions.

Market sources said Garrabrant is looking to form a new venture focusing on emerging markets. There is no word yet as to whether or not this new venture also would include McDonald.

Still, it would surprise very few if Garrabrant were to appear with an emerging markets firm of his own. After all, his passion to enter markets early is well known.

In an interview with PERE in 2009, Garrabrant recounted the formative years of Equity International. “From our first fund forward, we’ve consistently had high enthusiasm for emerging markets. Part of that is because we’ve had world-class partners and invested in terrific companies, but it also comes from being early and having courage.”

Now, it looks as though Equity International and Garrabrant will have to find the courage separately.