Sept. 24 (Bloomberg) -- Lehman Brothers Holdings Inc.'s plan to sell its investment-management division has been held up by wrangling over how to run the business and pay fund managers, according to three people familiar with the talks.

The bankrupt securities firm had aimed to announce the sale to Bain Capital LLC and Hellman & Friedman LLC by last week, said the people, who declined to be named because the negotiations with the buyout firms are private. Sticking points include the new company's management structure, compensation at the Neuberger Berman fund unit and valuing Lehman's private- equity assets. Lehman is working to close the deal this week.

Both sides want to complete a transaction before too many employees leave, reducing the division's value. Prior to filing for bankruptcy on Sept. 15, Lehman had hoped to keep a minority stake in the business, which oversees $273 billion in mutual funds and private equity. The New York-based company has already sold its North American investment bank and European operations as it liquidates.

``The longer they wait, there's less there,'' said Steven Kaplan, a professor who studies private equity and investment banking at the University of Chicago Graduate School of Business. ``You want to keep the people.''

Representatives of Lehman, Boston-based Bain and Hellman & Friedman of San Francisco declined to comment.

Joint Bid

Bain and Hellman, which originally submitted separate bids, are now negotiating to buy the unit together, valuing the business at less than $4 billion, according to the people.

Richard Fuld, Lehman's chief executive officer, engineered the purchase of Neuberger in 2003 for $3.2 billion and subsequently consolidated the firm's asset-management units into a single division. Neuberger oversees $130 billion and is considered the jewel of the group, which is headed by George Walker, a former Goldman Sachs Group Inc. banker and cousin of President George W. Bush.

There are about 25 separate teams within Neuberger that manage money for wealthy clients, and getting them all to agree to the terms of the transaction has proven difficult, the people said.

Another factor is the private-equity business, which has assets of about $35 billion in almost 40 funds. The buyers and Lehman have weighed a number of options over how to include some or all of that business in the proposed sale to Bain and Hellman. One issue is some of the funds' viability given financial commitments made by the now-bankrupt holding company.

Lehman's bankruptcy further complicates the sale because U.S. Bankruptcy Court Judge James Peck must approve any transaction. Peck last week approved the sale of Lehman's North American investment banking unit to Barclays Plc.

To contact the reporters on this story: Jason Kelly in New York at jkelly14@bloomberg.net; Elizabeth Hester in New York at ehester@bloomberg.net.

Last Updated: September 24, 2008 15:41 EDT