Carlyle Group's New Life Force

A Carlyle Group press release stated:

The Carlyle Group today announced it has signed a definitive agreement to purchase a majority stake in Light Force SpA, owner of Italian womenswear brand Twin Set Simona Barbieri, from founders Tiziano Sgarbi and Simona Barbieri and Italian-based growth capital fund DGPA Capital. Integral to the transaction, Carlyle has formed a partnership with Mr Tiziano Sgarbi and Mrs Simona Barbieri to develop and grow the Twin-Set brand.

Like Scalina, Carlyle's Brazilian affiliate, Twin Set Simona Barbieri sells lingerie.  Twin-Set also has beachwear, jeans, and girls clothing.

Light Force is headquartered in Carpi (Modena, Italy) and, with approximately 300 employees, is one of the fastest growing Italian companies in the womenswear “accessible luxury” sector. 

Other brands using the "accessible luxury" moniker include Banana Republic and Paule KA, which is owned by Change Capital Partners. 

Twin-Set news highlighted placement of their bikinis with Bikinis.com:

Expansion is ahead...

Update 7-19-14:  Carlyle will suck dividends from Twin Set.

Update 4-15-17:  Carlyle now owns 100% of Twin-Set and founder Simona Barbieri is no longer the company's creative director.

Update 11-30-17:  Carlyle is bringing Twin Set without Simona Barbieri to NYC, where it has other retailers, Supreme, Golden Goose Deluxe and Moncler (former Carlyle holding).

Update 1-30-20:  Carlyle hired JP Morgan to help sell Twin Set.  

Update 6-7-25:  Carlyle is very close to a deal.  Will it finally sell Twin-Set?  

Carlyle's "Seminole Project": Tax Supported

The Carlyle Group, with over $159 billion in assets under management, will develop Catalyst, a mixed-use development near Florida State University, alongside Chance Partners LLC and the Community Redevelopment Agency of the City of Tallahassee.  MarketWatch reported:

The Community Redevelopment Agency will make a significant contribution to the Project   

The press release did not state the amount of public money going into Carlyle's coffers.  Tallahassee contributed $450,000 to a Marriott Residence Inn in 2006 and nearly $500,000 to another mixed-use development along with 30 parking spaces.  How much did Carlyle get in "significant contributions" for a $25 million project?

One might expect that information to be public.  It's not.

Update 7-2-12:  Another news piece on the subject made no mention of this significant contribution or its exact size.

Health Insurance Premiums Ruled a Tax

Given the Supreme Court ruling that dollars paid to a private company is a tax, what would happen if I claimed the full amount of my health insurance premiums as tax paid in a calendar year? Will TurboTax allow me to attach the Court's decision to my filing? 

McDonnell's Teachable Moment on UVA's Presidency

The saying goes "you can't unring a bell," however one always has the option to ring it again, if it's not stolen or destroyed.  The University of Virginia Board of Visitors hired Dr. Teresa Sullivan, before it effectively fired her.  The Board meets Tuesday to put this issue to rest.  Will the Board, minus one Vice Rector Mark Kington, make the same decision, this time with a forma vote?

Virginia Governor Bob McDonnell turned strict father by telling the board to do it right Tuesday or they'll all be fired.  McDonnell's office was clearly in the loop on Sullivan's resignation, as evidenced by the Governor's June 10 press release.

Which McDonnell will come to fore in the coming week, the one with effusive praise for Sulivan?

"(Sullivan) has fulfilled her duties with honor, energy and good stewardship. In addition, President Sullivan has been a great partner with our Administration in our efforts to increase access and affordability at Virginia’s colleges and universities. Through her leadership, Virginia added nearly 1,000 new student slots and recently enacted the lowest yearly tuition increase in over a decade."

Or the McDonnell who believed a more "right individual" exists to lead Mr. Jefferson's University?. 

"I have great confidence that the Board of Visitors will conduct a thorough and diligent search for the next President of the University and will find the right individual for this prestigious and pivotal post." 

UVA's designated Interim President Carl Zeithaml is on hold until Tuesday's board meeting.  Zeithaml proposed this situation be a teachable moment.  I don't recall many teachable moments with clear rectification.  They seem to be more "It's over, let's talk about it and move on."

The last public teachable moment got a black man and a police officer a beer with President Obama at the White House.

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What might Governor McDonnell offer to Rector Helen Dragas and President Sullivan?  I suggest McDonnell dig into Virginia history and offer a peace pipe and smallpox blanket.  The question is who gets which?

Update 6-27-12:  Dr. Teresa Sullivan got the peace pipe and reinstatement as UVA's President

Forbes: China to Buy More U.S. Companies

Forbes reported:

China is coming to town. Like Japan in the 1980s, China will be the big Asian investor buying up pieces of America’s landscape, natural resources and companies.  It’s a good thing.

Over the weekend a U.S. Commerce Department official said during a conference in Nanjing that China investment in the U.S. was set to double.

The U.S.-China Cities Forum on Economic Cooperation and Investment began June 22 in Nanjing, China. Here's how the event was billed:

The two-day forum is co-organized by the US Department of the Treasury, US Department of Commerce, US Conference of Mayors, US-China Business Council, American Chamber of Commerce in China, and comparable Chinese governmental entities.  The conference will focus on economic partnership at the local level and explore ways for city-level government to assist in the expansion of economic cooperation and investment opportunities between the United States and China. 

City level government often has funds for small to medium enterprises, something important to corporate owners and investors.

What's driving China to invest in the U.S.?  China's foreign minister stated in The China Daily::

The Chinese government wants to develop industries with comparative advantages, while the US government hopes to expand its exports and revitalize the manufacturing industry, which allows much room for bilateral cooperation.

How might China use any U.S, investments for comparative advantage, their clearly stated aim?

The 2011 conference was held in Chicago.  The U.S. hosted version has the agenda and six audio recordings from the event.

Later in 2011 Carlyle Group co-founder David Rubenstein advised China to invest in the U.S.  Rubenstein's earlier predication had China becoming the largest private equity underwriter (PEU) in the world.  Carlyle recently announced the sale of AMC Entertainment to a Chinese firm.  That came after a Chinese bank refinanced Carlyle's New York property 650 Madison Avenue.

At the 2012 World Economic Forum in Davos, Carlyle's Rubenstein expressed his preference for the Chinese totalitarian model of central planning.  Rubenstein offered a dark vision for those not adhering to his advice.

"Our children are going to have and our grandchildren are going to have" a lower quality of life and a less affluent lifestyle than we enjoy today

In many ways PEU Rubenstein already made his vision a reality.  Take United Components (UCI) which Carlyle owned from 2004 to 2010.

When Carlyle purchased UCI it had no Chinese subsidiaries.  By 2010 UCI had thirteen subsidiaries in China or Hong Kong.  The number of employees fell from 6,900 to 4,350.  Carlyle pulled $35.3 million from UCI via a special dividend in 2007.   Add their $2 million annual management fee and the total rises to $47.3 million.  How many jobs did Conway send to China outside UCI?

UCI's is but one story of American jobs going overseas   This drives the current efforts to revitalize U.S. manufacturing, two of which are Renewing America (Council on Foreign Relations) and SelectUSA (U.S. Department of Commerce).   
The China Daily clarified who would provide incentives:

Unlike China, where incentive programs for foreign investors are mainly initiated by the central government, it is central and local authorities in the US who are responsible for drafting these policies.

The U.S. government and cities have the money and authority to lure Chinese investment.  I've not read about Chinese incentive programs where the government paid foreign investors, only the opposite.  Foreign investors need to pony up for the right to do business in China.

Returning to the UCI example, will U.S. backed Chinese firms get federal and local money for bringing jobs back?  UCI's Chinese subsidiaries are the right size, according to Steve Olson, SelectUSA's Executive Director.

The US welcomes more small- and medium-sized enterprises as well as entrepreneurial investors from the world's second-largest economy (China). 

Many small and medium sized enterprises are owned by private equity underwriters (PEUs).  Ubiquitous global PEUs are offered as the tonic to all ills.  SelectUSA's website highlighted various American industries and how interested parties could pursue incentives.  The section on Financial Services makes no mention of private equity.  Yet clearly, federal and local incentives will go to private equity affiliates, which will help the rich grow richer.  It happened in Texas under The Carlyle Group's ownership of Vought Aircraft Industries.  To think my tax money could benefit China owned PEU affiliates?  I find that singularly distasteful. 

China, with its abysmal quality, is coming.  Here's the rationale from one Carlyle executive, Managing Director David Marchick::

“Chinese investment would promote new economic activity and expose Chinese companies to Western standards of corporate governance, reporting, and accounting.”

Marchick was silent on Carlyle affiliate China Forestry, when it could only account for 1% of booked sales. 

PEU China, greedy, controlling and heavy handed,  will invest in the U.S. to its sole advantage.  China understands economics as an element of warfare.  Carlyle Group executives know this.  When greed is the prime motivation and government is but a tool, anything goes.

What happens when PEUs are ready to liquefy their small to medium sized Chinese firms doing business in the U.S.?  Will they crowdfund?  What information will be available to protect potential investors?

China imported a financial Wild West.  It stands ready to export it back to the U.S. Buyer beware.

UVA's Presidential Business

Near the end of my call home for Father's Day my father said, "Something's going on at UVA.  They fired the President.  You should check it out."  I avoided his advice until yesterday  My cursory review concluded the conflict to be the result of PEU/corporate memes being imposed by University Board members.  PEU is my abbreviation for private equity underwriters, whose memes include:

The belief that programs should pay their way from tuition/fees and be self sustaining (there is no intrinsic knowledge worth preserving through social/economic cycles).  

The drive to the lowest common denominator on costs, usually headcount and/or worker pay/benefits  (executive pay and political donations are exempt from this drive).

The unending demand to do more with less (based on whim, not on an understanding Dr. Deming's teaching). 

The notion that people are like rats and pigeons and must be extrinsically motivated to do a good job (If I am greedy, then you must be too, only extrinsic motivators cause great harm in organizations).  

After reviewing e-mails between UVA's Rector Helen Dragas and Vice Rector Mark Kingston, it appears the pair micro managed University President Teresa Sullivan, at least in the facility arena.  The e-mails start with both Board members wanting to drive down the cost of historical building renovation to condo construction or home renovation levels.  They shift to hiring a public relations firm and efforts to sell the firing.

Rector Dragas is President and CEO of a real estate development corporation in Virginia Beach, while Vice Rector Kington is Managing Director for X-10 Capital Management LLC, a "long-short hedge fund."  Kington is also President of Kington Management Corporation and a former PEU Managing Partner for Columbia Capital LLC.  In the small world of corporate boards, Dragos and Kington serve on the board of Dominion Resources. 

The insular corporate/PEU world has founders and partners querying affiliates outside the public eye.  There would be zero chance of involving legislators or garnering access to e-mails.  Teresa Sullivan had the fortune to work for Thomas Jefferson's University, steeped in tradition and a certain nobleness.

UVA's Faculty Senate stated in a letter to  the Board:

“We believe that this abrupt and, from our point of view, opaque decision will deeply threaten the way UVA is perceived by prospective as well as current faculty, students, and donors.  We strongly urge the Board of Visitors to reopen discussion with President Sullivan and the faculty.”

Politicians hate to be made the fool by people they appointed.  Vice Rector Kington resigned quickly, even though he was in line for the top spot.  Rector Dragas' train continues to wreck.  Will the PR firm find a way through the maze?

Governor Bob McDonnell charged the board with a final answer on Tuesday  My father, a former MCV faculty member, predicted Dr. Sullivan will be reinstated this week. I'm not so sure. Nevertheless, the stakes are sufficiently raised.

Update 6-24-12:   Some 1,500 people rallied on the Lawn in support of President Sullivan. 

UVA's PEU Presidency

The controversy surrounding the University of Virginia's Board of Visitors' firing of President Teresa Sullivan is founded in management theory.  Sullivan's differed from the Board.  News reports shared the Board's displeasure with Sullivan's failure to eliminate low volume programs and layers of educators and staff.  For being "incremental" in her approach, President Sullivan lost her job.  She was effectively fired by the Board.

UVA's Board appointed McIntire School of Commerce head Dr. Carl Zeithaml as Interim President.  Disclosure:  I graduated from UVA with a B.S. in Commerce in 1980.  Fortunately, it was prior to private equity's evolution from leveraged buyout organizations (LBOs).  However, a more refined name (than LBO) did not eliminate greed as the central core.

McIntire embraced alternative assets and private equity underwriters (PEUs).  PEU is my pet name for the greed and leverage boys, hence the name of this blog.  Under Zeithaml's leadership UVA's undergraduate business school implemented a tuition premium, i.e. massively higher fees to obtain the coveted McIntire degree.  I like to think of McIntire's "differential tuition" as a PEU education management fee. 

Back to the ouster of Dr. Sullivan, which outraged professors, alumni and the public   Resignations flew from high profile professors, the Board, and alumni donors.  The Associated Press stated:

"Zeithaml said he is suspending negotiations for his takeover as University President until the Board of Visitors meets next week."

"Suspending takeover negotiations," it doesn't get more explicit than that.  Dr. W. Edwards Deming, the legendary management guru, taught:

"Quality starts in the board room."  

Dr. Deming continued to learn until his death in 1993.  In his final years he stressed transformation of management using his system of profound knowledge.  Deming decried LBO's (and their eventual PEU brethren) as harmful to constancy of purpose.  PEUs employ financial machinations like "optimizing capital structure" (loading up debt) and "liquidity recapitalizations" (bleeding cash via debt-financed special dividends).  They also rob resources with annual management fees. 

Near the end of his life, Deming said "It comes down to one thing, the human spirit."  Many of today's management practices crush the human spirit with an over reliance on extrinsic motivators and obsession with outcome targets.  "Meet the numbers or we'll find someone who will" is a common management threat.  This is the essential message from the Board of Visitors to President Sullivan.   .

The human spirit remained alive at Mr. Jefferson's University, as people sought information on what happened and why.  The Board didn't take a full vote on asking for Sullivan to step down.  It hired a public relations firm to manage any blowback.  When governance fires a leader outside the sunlight, how are people in the organization to interpret the act?  How should they behave going forward to avoid a similar fate?  UVA's Board drove in fear, which is deadly for an organization wanting to survive.      . 

"The most important things are unknown and unknowable."--Dr. W. Edwards Deming

What's the cost of a surprise firing of UVA's President?  What's the cost of a school in chaos?.

This decision ultimately rests in Governor Bob McDonnell's hands, given his power of political appointment.  He is the fox guarding Mr. Jefferson's University, only McDonnell has two pups matriculating to UVA.  It should be an interesting week.

Update 4-26-15:  Dr. Deming said his message came down to one thing, the human spirit.  PEUs and their horrific management practices can be seen in a powerful story of how management crushes that very thing.