i’d say ”hello, hold on” to friend #2, then turn back to #1, finish up the topic, say nice to see you/thanks for the shmooze/etc, then excuse myself n say goodbye before launching into convo with #2.
If you’ve ever been friend #1, you know how awkward it could be, and that discomfort of not knowing if your convo is over and you should leave, or if it’ll continue in just a minute, or if you should be joining in the new convo or what!