Saturday, July 19, 2008

Carlyle Group Spanks Another Double on Sonitrol Sale

The Carlyle Group, a huge politically connected private equity underwriter (PEU), sold yet another affiliate for more than twice the original purchase price. Carlyle and two other firms purchased Sonitrol, a commercial security company, for $125.5 million in March 2004. They announced the sale to Stanley Works for $276 million, roughly netting a $150 million profit. A 120% return in 4 years falls within Carlyle's expected range.

Carlyle investors continue to reap savings from the Bush tax cuts, 15% vs. 20% capital gains, and the PEU boys still get their income taxed at a preferred 15%, thanks to "carried interest". With Carlyle's take approximately 20%, let's examine Uncle Sam's gifts to the wealthy:

Capital gains savings ($120 million x 5%) equals $6 million.
Carried interest lollapalooza ($30 million x 19%) totals %5.7 million

George W. Bush and the U.S. Congress enabled Carlyle investors and employees to pocket an extra $12 million on the Sonitrol deal. They plan on using these proceeds to buy American roads, bridges, water and sewage systems. Or they might use the proceeds to bribe politicians for the business.

Politicians and business leaders greasing each other's palms? It's known as a general capitalistic tendency. That and lawsuits involving franchises. Sonitrol franchisees have lawsuits against their owners, while Dunkin Brands entertains a suellapalooza against their franchises. So much for Carlyle's stellar reputation as an operator. But they can sell the hell out of something.