September 22, 2018

Carlyle Group Prepares for IPO

Carlyle Group, a private equity firm, is going forward with its intention for an initial public offering, hoping to raise more than $1 billion, but has not formally filed with the Securities and Exchange Commission. In private meetings, the firm is contending that it is worth just as much as its rival, Blackstone Group LP (BX). According to accounts about Carlyle’s marketing materials, Caryle believes that with steadier earnings, shareholders should be offered a more predictable dividend. With a business model of spreading money into many smaller funds, as opposed to their competitors, who have larger sums in fewer pools, Carlyle argues that it should be treated more like a traditional asset-management company.

Speaking to Bloomberg news, Mark Bronzo of Security Global Investors said: “If they’re paying a decent dividend, especially in this marketplace, that’s going to get an attractive valuation. I think you’ll see a good appetite for this company because of the sheer size and name recognition. This is a premier group.”

IPO Registration and Disclosure

Formed in 1987 by David Rubenstein, Daniel D’Aniello and William Conway, and managing $153 billion, this is the largest IPO by a private equity firm since 2007, when Blackstone raised $4.75 billion. With the registration statement, Carlyle is required to disclose never before released financial information, including 24 years worth of returns for investors. In the past, only private investors have been privy to this information.

New Flagship Fund

Carlyle is also looking to start a new flagship fund totaling at least $10 billion. Investors in the last flagship fund, who have only seen less than 10% of their capital returned, are demanding that Carlyle itself contributes at least 3% to the fund’s capital. If that is the case, Carlyle will need to finance approximately $300 million over the next several years.

IPO Roadshow

Bloomberg is reporting that Carlyle’s roadshow includes efforts to reverse investors’ negative views on private-equity incentive fees, known as ‘carry’ or carried interest. These earning are very unpredictable, especially during an economic slowdown. In addition to persuading investors to pay a greater amount for carried interest, Carlyle is attempting to emulate Blackstone’s successful method of getting shareholders to pay for its diversification efforts. According to Blackstone’s founder, Stephen Schwarzman, its hedge-fund business grew to $40.6 billion as of June. The company’s total fee-earning assets under management rose by 27% to $129 billion in the second quarter. The largest portion of this was its hedge-fund business, accounting for $37.2 billion.


While Carlyle hasn’t released comparable figures and still relies on buyouts for the majority of its revenue, it is looking to diversify in a similar way to Blackstone. Its purchase of Dutch money manager AlpInvest Partners NV, saw it enter the private equity funds-of-funds business. AlpInvest generated revenue of approximately 105 million Euros in 2010, including management and incentive fees.

Co-founder Mark Rubenstein has been focussing on starting new funds, looking at specific geographic areas where investors wanted to see their money put to work. He has overseen Carlyle’s buyout business expand outside of the US, with 35 offices spanning six continents.

Carlyle entered the business of real estate investing in 1997 and it formed a credit fund in 1999. Its Global Market Strategies division, led by former Morgan Stanley sales and trading chief, Mitch Petrick, has bought majority stakes in two hedge funds, since he joined in 2010. Carlyle’s 1440 private backers (limited partners) committed capital of $4.2 billion in 2010, according to the annual report. In comparison, New York based KKR, with 350 private investors, has raised $5 billion. Blackstone, with 1,300 private investors, raised $5 billion through the hedge-fund unit alone in the first half of this year. Blackstone’s total capital raised in 2010 was $18 billion.

Investor Concerns

Some investors are concerned about the fall of other private-equity stocks in recent years. Blackstone’s IPO was $31 a share on June 21, 2007. The stock fell below $31 a week later, and has never regained value. It was trading on the NYSE yesterday at $13.73. KKR and Apollo both lost value after they sold stakes to investors, but KKR is currently up about 5%.

Referring to Carlyle, Josef Schuster, founder of Chicago-based IPOX Schuster LLC, told Bloomberg news: “There’s a precedent from the incumbents that indicates to me that this shouldn’t trade markedly differently. Investors are not going to step up and pay a substantial premium.”


Carlyle has selected Citigroup, Credit Suisse and JP Morgan Chase to lead the offer. It is thought that Carlyle will list as early as September. After the IPO has been completed, D’Aniello will serve as chairman, with Rubenstein and Conway taking the roles of co-chief executive officers.

Read more:

Bloomberg Article

Financial Times

Wikipedia Entry for Carlyle Group

Wikipedia Entry for Blackstone Group LP

Wikipedia Entry on Carried Interest

Carlyle Group Website