Carlyle continues $100 bln fundraising push after active Q3

  • Carlyle holds first close on $4.5 bln for new Asia fund
  • U.S. buyout fund projected to hold first close by year-end
  • Conway, Rubenstein handing reins to Lee, Youngkin

Carlyle Group’s new co-CEOs, Kewsong Lee and Glenn Youngkin, will have a fresh supply of capital to put to work in private equity when they begin their tenure next year.

In its third-quarter earnings call, the $174 billion asset manager announced a first close on more than $4.5 billion for its latest Asia-focused PE fund.

The firm’s U.S. buyout fund, which Bloomberg reported as targeting $15 billion, is also expected to hold a first close by year-end, the firm said.

Carlyle Asia Partners IV is a $3.9 billion 2013 vintage fund. The firm’s previous U.S. buyout fund raised $13 billion in 2013.

Carlyle Group raised $7.1 billion across its entire investment platform in Q3. Co-founder William Conway Jr. said the firm already matched that amount through the first month of Q4, putting it well on its way to meeting the $100 billion fundraising goal for 2016 through 2019.

So far, the firm’s biggest problem has been turning investors away, Co-Founder David Rubenstein said on the call. “We’re going to be oversubscribed,” Rubenstein said. “We’re telling people if they want to be in these funds, they have to be in the first close if they want to get the full allocation.

“It’s a good problem to have, but it’s one nonetheless that we spend a fair amount of time on,” he added.

Another challenge will be putting that capital to work in what is poised to be a high-priced deal environment for the foreseeable future. The median purchase-price multiple on U.S. deals stood at 10.5x EBITDA through 2016 and the first three quarters of 2017, higher than in any other period over the previous decade, according to Pitchbook data.

Even so, Carlyle has remained relatively active on the deal front, investing almost $7 billion across its entire platform in the third quarter. In the earnings call, Conway noted investment opportunities in China, India and Japan — the firm invested in McDonald’s’ Chinese business with CITIC Capital Partners in August — as well lower prices for assets in Europe.

“It’s not months; it’s a multiyear time frame to do all the hard work to get a deal done,” said Lee, a former dealmaker for Warburg Pincus. “I think we’re very well positioned.”

Carlyle Group finished the quarter with $174 billion of assets under management. The firm has 31 offices worldwide.

Transition

The Q3 earnings call is Conway and Rubenstein’s last at the helm of the firm they founded alongside current Chairman Dan D’aniello in 1987.

Conway and Rubenstein are stepping down as co-CEOs at the end of the year. The duo will become co-executive chairmen and will continue to serve as part of Carlyle’s executive group, with Conway staying on as co-chief investment officer alongside Peter Clare.

D’aniello becomes chairman emeritus and will also serve on Carlyle’s executive group.

“The funds are performing well, our investors are trusting us with increasing amounts of capital, and our financial results reflect those trends,” Youngkin said during the call.

“We’re convinced the best is yet to come,” Conway said.

Action Item: For more on Carlyle Group, visit www.carlyle.com

David Rubenstein, co-founder and co-CEO of Carlyle Group, speaks at the Milken Institute Global Conference in Beverly Hills, California, on May 2, 2016. Photo courtesy Reuters/Lucy Nicholson