Saturday, July 9, 2011

March of the Carlyle IPO

Dealbook reported The Carlyle Group closed on AlpInvest, a $43 billion fund, which brings Carlyle's assets under management to $150 billion.  The private equity underwriter (PEU) is shopping for other assets, including an energy focused PEU:

Carlyle’s potential acquisition of Energy Capital Partners underscores the relentless drive by the firm to gather more assets and broaden its product line as it gears up for an initial public offering.
Energy Capital Partners invests in power plants and energy pipelines.  Carlyle had an energy joint venture partner in Riverstone Holdings.  Dealbook implies Carlyle proposed to Riverstone, which said no.

Carlyle and Riverstone, which have co-sponsored six energy and power funds over the last decade, notified their investors in a letter sent last week that they would not raise another fund together and would go their separate ways. Riverstone’s partners have decided to stay independent.
Riverstone's Lord John Browne has been historically difficult to nail down.  Club insiders look after their own.

Dealbook referred to two Carlyle failures in 2008:

During the financial crisis, two of its homegrown hedge funds — Carlyle Capital and Carlyle Blue Wave — collapsed after wrong-way bets in the debt markets.

Carlyle Capital Corporation was based in Guernsey (off the coast of France).  How is that homegrown?  Also, CCC's failure contributed to the financial crisis.  It was the canary in the coal mine.  FT reported in March 2008, six months prior to September meltdown:

Carlyle Capital Corporation (CCC) is to be wound up after the $22bn Amsterdam-listed mortgage fund said its shareholders had approved an application for a court appointed liquidator to sell its remaining assets.

Dealbook noted Carlyle's partner in criminal settlements, the aforementioned Riverstone Holdings

Carlyle and Riverstone both became ensnared by the New York attorney general’s investigation of corruption of the state’s public pension fund by political officials and private equity funds. Carlyle paid $20 million and Riverstone paid $30 million to resolve their roles in the case.
The total Carlyle-Riverstone placement fee (bribe) settlement came to $70 million, when Riverstone's founder is included.

Dealbook said nothing about Monument Capital, a Carlyle loaded private equity underwriter focusing on security firms.  One look at Monument's advisory board shows major Carlyle players.  Monument looks like a Carlyle Group franchise.

Given Carlyle's diversification with Claren Road (hedge fund), Emerging Sovereign Group (developing market PEU), AlpInvest and talks with Energy Capital Partners, FT's 2008 assessment is worth revisiting:

Its strategy (CCC) was undone by the turmoil in the mortgage markets, dealing a heavy blow to the reputation of Carlyle, one of the world’s biggest private equity groups, and raising questions about whether it became too diversified.
Three PEU leaders mentioned in the piece recently gathered at the Milken Institute Global Conference. 

It was a hoot seeing private equity mavens snark at each other.  Ever the competitors and salesmen, those PEU boys.  As for Carlyle's IPO, their co-founders can rocket up the global billionaires list.  Isn't that what it's all about?  Big money, bigger egos.

Update 8-23-11:  Dealbook reported on Claren Road's origins and a number of fund unwindings.