Dealmaker Green takes lesser role at his buyout firm.

When Leonard Green & Partners closes its $1.25 billion fund next month, it will become the best-capitalized leverage buyout firm in Los Angeles.

But unlike previous funds that the firm has raised, this time around Leonard Green himself won't be deciding where most of the money goes.

That's because the legendary dealmaker and founder is taking a step back from day-to-day operations, according to investment banking sources.

Green, 65, is now assuming more of a chairman emeritus role, giving final approval to deals and offering advice, but generally staying clear of fund raising and deal making. He's leaving that to his three 40-something senior partners: Jonathan Sokoloff, John Danhakl and Peter Nolan.

"I think there is a generational transition going on there," said the managing director of a leading investment bank who asked to remain unnamed. "There are no major decisions being made without his approval, but Leonard Green is definitely taking a less-active role. Sokoloff, Nolan and Danhakl are taking a leading role."

Green did not return calls. Peter Nolan confirmed that Green has assumed a less hands-on role in running the company, but insisted that the boss still has a say in every deal done.

"No major decisions happen without an agreement by all the partners," he said.

Nolan also confirmed that the firm is in the midst of a major transition.

"Leonard has orchestrated a generational shift," said Nolan. "A lot of people in his position don't allow their companies to grow because they want to maintain total control, so they eventually go out of existence. But Leonard has transformed the company from a proprietorship into an institution."

Since Nolan and Danhakl were brought on a couple years ago and given an equity stake, Green is no longer the majority share holder, though he still holds the largest individual stake. Sokoloff had been brought on prior to Nolan and Danhakl, with the latter two having been brought on specifically to raise the $1.25 billion fund.

Green is considered one of Los Angeles' preeminent dealmakers. Since 1989, his firm has bought more than 20 companies. Green's favorite targets have been in the retail sector, including sporting-goods chains, home-improvement stores and pharmacies.

The firm's latest acquisition, which closed just this month, is Philadelphia-based Dollar Financial, a national chain of check-cashing stores.

With the closing of the latest fund in January, the firm will have around $1.75 billion under management.

Nolan said the firm will be investing at least $250 million a year for the next five years, much of it in the Los Angeles area. And because LBO firms typically leverage their investments by a factor of four or five, the total value of the firm's deals will likely top $1 billion per year.

As for future targets, the firm expects to continue retail acquisitions, but will take a more-diversified approach beginning in 1999. "So far, about half our deals have been in retail, but we expect that percentage to decline," Nolan said.