Tuesday, February 9, 2021

Carlyle Fees Affiliates



Roughly half of The Carlyle Group's 2020 revenue came from management fees.  Carlyle charges affiliates fees, both management and deal fees.  It also mines them for dividends and special distributions.

The Carlyle Group cashed in a number of affiliates during 2020.  Often times management fees disappear in an IPO.  That did not happen with Carlyle's IPO of Ortho Clinical Diagnostics.   OCDX had a rough start but has since recovered.

New shareholders will continue funding annual management fees for The Carlyle Group to the tune of $3 million per year for 2021-2022.

OCDX's S-1 stated:.  

The Company entered into consulting services agreements with Carlyle Investment Management, L.L.C. (“CIM”), pursuant to which the Company pays CIM a fee for advisory, consulting and other services to be provided to the Company. Pursuant to the consulting services agreement, which has an initial term of ten years, the Company pays an annual management fee to CIM of $3.0 million (the “Management Fee”). The Management Fee is payable on a quarterly basis. The Company will also reimburse CIM’s reasonable out-of-pocket expenses incurred in connection with services provided pursuant to the consulting services agreement, and the Company may pay CIM additional fees associated with other future transactions or in consideration of any additional services provided to the Company under the consulting services agreement. During the fiscal years ended December 29, 2019, December 30, 2018 and December 31, 2017, the Company recorded $3.1 million, $3.0 million and $3.1 million of Management Fee expense and other out-of-pocket expenses, respectively.

The company paid Carlyle $12.1 million in management fees through 2020 with $10.5 million more due in the next four years (through 2024).  I hope shareholders read the fine print.

Update 2-10-21:  Moody's upgraded OCDX after the IPO:

Moody's-adjusted Debt/EBITDA declined from approximately 8.0x as of December 31, 2020 to approximately 5.5x.

That's PEU leverage.