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Carlyle v. Blackstone: A Contrast In Confidence

The Blackstone Group is notably less bullish on large deal activity and the economy than its Washington, D.C.-based rival The Carlyle Group.

The disparity in confidence reflects that the economic recovery is sending mixed messages to two of the largest and most respected global investment firms, which together manage about $235 billion.

Carlyle closed two multi-billion dollar deals in the first quarter alone: its $3.7 billion buyout of CommScope Inc. and its $2.6 billion buyout of Syniverse Technologies, which were the second and fourth-largest deals closed by a U.S.-based firm in the first quarter, respectively. The firm’s U.S. buyout group invested or committed about $2.87 billion in the first quarter.

Though Blackstone closed the seventh-largest deal of the quarter, its $654 million buyout of Polymer Group Inc., the firm has been notably quiet. In December, it was part of a $1.2 billion takeover Mivisa Envases, a Spanish maker of tinplate cans for the food industry. But besides that, its last $1 billion plus new acquisition (at least one company it already owns, Pinnacle Foods, made a billion dollar plus acquisition of its own) was Busch Entertainment in 2009. Instead, Blackstone’s been devoting much of its time to helping its portfolio companies buy other companies and making smaller investments, often in companies based in emerging markets, such as China, India and South Korea.

Blackstone Senior Managing Director Garrett Moran described the deal environment with words like “quiet” and even “hum-drum” at the Reuters Global Mergers and Acquisitions Summit today in Reuters’ Times Square offices. There aren’t enough companies willing to sell at agreeable prices, and there’s a mix of confidence among sponsors, he said.

Carlyle’s confidence in global macro-economic trends buttresses its willingness to write big checks again. Low interest rates, government stimuli, growth in emerging markets, and record corporate profits thanks in part to Great Recession-inspired cost reductions are among the reasons for the firm’s positive outlook, as Peter Clare, co-head of the firm’s U.S. buyout group, recently told Buyouts.

On the sidelines of the Reuters Summit, Moran told Buyouts Blackstone isn’t as confident as some firms that have struck multi-billion dollar deals lately. He didn’t name Carlyle, but he agreed that Blackstone has a more pessimistic outlook, without going into details. “It’s just what we see,” he said. “There’s no one [reason].”