March 31, 2023

DealBook: Carlyle Group Buys Getty Images in Unusually Busy Summer

David M. Rubenstein, co-founder of the Carlyle Group, one of the world's largest private equity firms.Chris Kleponis/Bloomberg NewsDavid M. Rubenstein, co-founder of the Carlyle Group, one of the world’s largest private equity firms.

While summer has traditionally been a slow time for deal making, the Carlyle Group has been on a buying spree in recent weeks.

The buyout firm said on Wednesday that it would buy Getty Images, the big provider of high-quality images and video, from another private equity shop for $3.3 billion. It was the second major buyout that Carlyle announced in the last week, after the takeover of the TCW Group, a Los Angeles-based investment manager, from Société Générale of France.

The two leveraged buyouts are only the latest in a string of recent deals by Carlyle. That list includes taking control of Sunoco’s huge Philadelphia refinery and buying a stake in Genesee Wyoming, a railroad operator that is buying a smaller rival.

The firm has struck 19 deals worth nearly $14.1 billion over the last 12 months and currently tops the Thomson Reuters rankings of acquisitions by private equity firms.

By contrast, Kohlberg Kravis Roberts, another major buyout firm, announced nine deals worth $9.2 billion during the same period, and Bain Capital reported eight deals valued at $4.7 billion. The Blackstone Group disclosed nine deals worth $1.2 billion.

While coincidental — many of the deals have been in the works for months — Carlyle’s activity this summer belies a generally slow time for private equity firms. Deal making in general has been hampered by economic uncertainty, which also limited growth in the value of buyout firms’ holdings.

Carlyle has not been immune to the industrywide malaise. Last week, the firm announced that it had a $57 million loss in its second quarter, burdened by slow growth in its investments.

Yet even then, executives stressed that they saw opportunities. The firm pointed to $3 billion in realized gains during the quarter, as well as nearly $4 billion in new capital.

William E. Conway, a co-chief executive of Carlyle, has said that a volatile market could unearth interesting bargains for his firm. That has been a common refrain among many buyout executives, who argue that their vast stores of uninvested capital and a potential rise in undervalued companies could only help propel deal making.

“Great investments can be made in a bad economy and lousy investments can be made in a vibrant economy,” Mr. Conway said last week on the firm’s earnings call with analysts. “Notwithstanding weaker global economic conditions, we see good investing opportunities across our platform.”

So far, it appears that Carlyle is carrying through on that promise.

Over all, Carlyle has committed about $5.5 billion in equity capital from its various investment funds for new deals this year.

Executives at the firm said that such a pace is not unusual. Carlyle is one of the largest in the industry, with more than 99 investment funds and 1,300 professionals around the world.

The six deals that the firm announced since July came from five different vehicles. The Getty deal was struck from one of its main United States buyout funds, Carlyle Partners V, while the Sunoco transaction was made from the firm’s Equity Opportunity and Energy Mezzanine Opportunities funds.

“There’s been no big shift in our mind-set that now is a good time to deploy capital,” Peter J. Clare, a co-head of Carlyle’s United States buyouts group, said in a telephone interview. “It’s more a reflection of the depth of our industry teams and the capital of our funds.”

The Getty deal arose out of an auction that the image provider’s current owner, the buyout firm Hellman Friedman, began running several months ago.

Over all, executives expect the Carlyle’s main American buyout fund, which has $13.7 billion under management, to reach a general investment target of about 20 percent of its available capital.

“We’re right on track for what I’d call an average year in terms of equity investment from the U.S. buyout fund,” Mr. Clare said.

With debt financing relatively cheap at the moment and with more companies willing to sell themselves, Carlyle executives said that the firm has simply benefited from more opportunities, without lowering the benchmarks for its investments.

“We’re holding to the same standards,” Mr. Clare said. “But more companies coming to the market is putting more opportunities in front of us.”

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DealBook: Carlyle Files to Go Public in Next Year

David Rubenstein, co-founder of the Carlyle Group.Jonathan Alcorn/Bloomberg NewsDavid M. Rubenstein, a co-founder of the Carlyle Group.

8:48 p.m. | Updated

The Carlyle Group took its biggest step Tuesday toward joining an elite club: private equity giants with public stock tickers. But as the stock and debt markets whipsaw, the timing of an initial public offering remains unclear.

Still, the filing propels Carlyle along the path already trod by several of its biggest rivals, including the Blackstone Group and Kohlberg Kravis Roberts. And it marks the latest step in the evolution of the firm, from a private equity shop with deep ties to political figures to a $153 billion investment titan with hedge fund and real estate arms.

Stocks of private equity firms, to be sure, have generally fared poorly. Blackstone, which priced at $31 in 2007, began tumbling soon after the firm’s offering. They closed on Tuesday at $12.50. And Apollo Global Management, which gained a public ticker in April after having traded on a private exchange, closed on Tuesday at $12.19 — well below its $19 initial offering price.

Despite filing for an initial offering on another volatile day in the stock market, Carlyle is not expected to plunge into unfavorable market conditions, having waited years to go public. But it is currently considering going public by the end of the first quarter in 2012, according to a person briefed on the matter who was not authorized to speak publicly.

Once known for its investments in military contracting, Carlyle has since participated in dozens of big name takeovers, including those of Dunkin’ Brands and Hertz.

The firm has gone on an acquisition spree over the last year to diversify its business beyond its core private equity funds and make itself more attractive to its investors and public shareholders. Among those deals were taking majority stakes in two big hedge funds and in a European fund of funds.

Carlyle, founded in 1987 in Washington, had made little secret of its desire to go public. As far back as 2007, David M. Rubenstein, one of the firm’s co-founders, described it as “a natural candidate to go public.”

Tuesday’s filing, like many initial prospectuses, discloses relatively little about Carlyle’s initial offering plans. Its disclosed fund-raising intention, $100 million, is a preliminary figure meant only to calculate the filing fee. And the voluminous document lacks juicy details like the firm’s valuation or the compensation of its top executives.

Still, Carlyle opened its books to the public a little, showing how yet another private equity firm had bounced back from the lows of the financial crisis. Last year, the firm reported $2.8 billion in revenue and $1.5 billion in net income, both significantly higher than 2009.

Using economic net income, a nonstandard accounting measure preferred by Blackstone and K.K.R., Carlyle earned just over $1 billion.

By comparison, Blackstone reported $3.1 billion in revenue and $485.5 million in economic net income last year.

Carlyle showed even more improvement during the first six months of this year, reporting nearly $2.1 billion in revenue and $770.2 million in economic net income for the period.

Its revenue from management fees has grown 16 percent thanks to several fund acquisitions, while its performance fees have jumped 971 percent because the value of its investments has improved.

Yet it is not clear whether Carlyle can sustain those gains, as the stock and credit markets come under stress from concern about weakening economic growth. Borrowing costs have been rising in recent weeks, threatening to erode the ability of private equity firms to strike lucrative leveraged buyouts.

Carlyle also confirmed that changes to its management structure that reflect its shift from a private partnership to a publicly traded company. Its three co-founders will remain at the top: Daniel A. D’Aniello will become the firm’s chairman, while William E. Conway Jr. and Mr. Rubenstein will be co-chief executives. (Together, the three are known inside the firm as “D.B.D.”)

Many in the buyout industry see the firm’s initial public offering as a way for Carlyle executives to cash out on their holdings eventually, as Blackstone co-founder Peter G. Peterson did in his shop’s 2007 I.P.O. That could eventually allow the co-founders to pass the firm’s reins onto a new generation of leaders, which includes Glenn Youngkin, Carlyle’s chief operating officer.

But initially, major equity holders, including the co-founders and outside investors, will be subject to lock-up agreements. Mubadala, an investment arm of the Abu Dhabi government that took a 7.5 percent stake in Carlyle in 2007 and invested an additional $500 million last year, can begin selling down its holdings in stages after a year. Another is the giant California pension fund Calpers, the California Public Employees’ Retirement System, which took a 5.5 percent stake in 2001.

Peter Lattman contributed reporting.

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