MGMT 495Summer 2011:Kelly Bossolt

Marta KovorotnaSarah Smith

CARLYLE GROUP: “We try to mix our investment culture with third-party objective

management experience and local knowledge. We have done this across all our funds. We’re never satisfied that we’ve built the best model. We constantly try to morph the catcher’s mitt to the pitch that’s being thrown.”

Diniel D’Aniello, Carlyle co-funder

Investors chose funds, Carlyle decides where to invest the fund’s money

EXECUTIVE SUMMARY Financial Analysis External Analysis

Market Entry Rivals & Substitutes Investors & Activities International Entry

Internal Analysis Early Years2 2008 Structure Resources Capabilities

EXTERNAL ANALYSIS: ENTRY

Relatively Easy to Enter Need expertise Need cash flow Need investors

Based on Trust & Performance

Carlyle was founded in 1987

EXTERNAL ANALYSIS: RIVALS & SUBSTITUTES

The Blackstone Group, KKR, TPG Mostly NY based Companies Focused on the biggest acquisitions

Carlyle focused on small & mid-market deals Hard to substitute

Different strategy, and ideas Easily imitated with the right expertise

EXTERNAL ANALYSIS: INVESTORS & ACTIVITIES

Investors Public & Private

Institutions High net worth

Individuals Investment Activities

Very Conservative Only invest in places with

expertise Always get multiple

approvals

EXTERNAL ANALYSIS: INTERNATIONAL

Europe – 1998 Smooth Entry

Asia – 1999 Hong Kong & Seoul Rocky Beginnings

Strategy – Buyout, they wanted Growth Capital

INTERNAL ANALYSIS: EARLY YEARS

Washington, D.C. location Extensive government contacts

Identified investment opportunities overlooked by Wall Street Heavy investments in Defense industry

BDM Hired people with top public sector experience

James Baker, former Secretary of State Arthur Levitt, former SEC Commissioner

INTERNAL ANALYSIS: TRANSITIONS

September 11, 2001 Defense industry caught a bad rep. Carlyle pulled back

Began buying distressed companies Titanium-component maker Stellex After reviving them, Carlyle sold making 6.3 times it’s invested capital

Change in team Strong business and leadership skills, opposed to those with strong political connections

INTERNAL ANALYSIS: 2008

Able to sustain growth through the financial crisis Four main investment activities

Buyout Specialized by industry: “Industry trumps everything-it trumps product

type & geography” Leveraged Finance

CDOs Real Estate

Commercial & residential Growth Capital

Assisted companies in getting started and growing quickly

INTERNAL ANALYSIS: ORGANIZATIONAL STRUCTURE

Employees belonged to 1 of 3 groups Deal makers Investor relations & fundraisers Investor Service

Each of the 48 funds operates as its own regulatory and legal entity

2008 Decentralized decision making through 5 investment sectors

INTERNAL ANALYSIS: TALENT & CULTURE “Good investment professionals don’t grow on trees” “We want people to help us build a cannon” not here for personal gain” 2000

HR was established Annual reviews, employee retreats, 360 degree evaluation

Take time to mentor your team “Do good deals and everything else will take care of itself.” Talent must have strong entrepreneurial orientation to make and close deals

INTERNAL ANALYSIS: CAPABILITIES

Shared information and expertise across funds, industries and geographies

One Carlyle approach Had a knack for reviving distressed companies some of which were in

distressed industries BDM, Forged Metals & Firth Rixon, Dex

Experts in every industry Known to be Risk-Averse Resilient and diversified across asset classes Succeeded by doing things slightly different from others

Global Financial Services ( Not traditional among PE firms)

INTERNAL ANALYSIS: RESOURCES

Their team: 203 MBAs 34 JDs 11 Ph.Ds/M.Ds

33 offices in 22 different countries Internationalize through localization

Regional offices opposed to only one per country “We don’t parachute Americans in.”

Important to hire foreign national that are deeply rooted in the local business culture

RECOMMENDATIONS: Be cautious within the financial services sector

Probably not traditional for a good reason Too complex and far too risky Example: Boston Private Financial Holdings not doing well