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The Carlyle Group: The Big Boys of Private Equity

Overview:

Founded in 1987 and headquartered in Washington DC with office in 21 countries, the Carlyle Group is one of the world's largest private equity firms. Since its founding, the firm has invested US$46.3 billion of equity in 802 transactions, has more than 1,200 investors from 71 countries, and now has 60 funds with a combined total of more than US$82.7 billion under management. Sectors of focus include aerospace & defense, automotive & transportation, consumer & retail, energy & power, financial services, healthcare, industrial, infrastructure, real estate, technology & business services, and telecommunications & media. Investment opportunities are sought in four areas: buyouts, growth capital, real estate, and leveraged finance.

Management Team:

The Carlyle Group has become known for employing (sometimes controversially) a who’s who of former political leaders from around the globe in a variety of capacities, including former US President George H.W. Bush (Senior Advisor on the Carlyle Asia Advisory Board, 1998 to 2003), former US Secretary of State James Baker III (Carlyle Senior Counselor, 1993 to 2005), former US Secretary of Defense Frank Charles Carlucci III (Chairman,1992-2003; and Chairman Emeritus until 2005), and former British Prime Minister John Major (Chairman of Carlyle Europe, 2002 until 2005).

The current management team includes Louis V. Gerstner, Jr. (Chairman) who joined the Carlyle Group in January 2003. Prior to joining Carlyle, Louis served as the Chairman and the CEO of IBM, the Chairman and CEO of RJR Nabisco, the Chairman and CEO of American Express’s largest subsidiary (American Express Travel Related Services Company), and a Director with McKinsey & Co. In the past, he has also served on the boards of Bristol-Myers Squibb, The New York Times, American Express, AT&T, Caterpillar, Jewel Companies, Melville Corporation, RJR Nabisco Holdings, and DaimlerChrysler Chairman’s Council.

Other current members of the senior management team includes:

Ÿ          William E. Conway, Jr., Founder - A former Senior Vice President and Chief Financial Officer of MCI Communications and various positions with The First National Bank of Chicago.

Ÿ          Daniel A. D’Aniello, Founder - A former Vice President for Finance and Development at Marriott Corporation and a financial officer at Pepsico and TWA.

Ÿ          David M. Rubenstein, Founder - A former attorney with Shaw, Pittman, Potts & Trowbridge; Deputy Assistant to the President for Domestic Policy in the Carter administration; Chief Counsel to the U.S. Senate Judiciary Committee’s Subcommittee on Constitutional Amendments; and a former Attorney with Paul, Weiss, Rifkind, Wharton & Garrison.

The Aerospace and Defense Team

The Aerospace and Defense team consists of the following Senior Advisors:

Ÿ          W.W. (Bill) Boisture , Senior Advisor - Formerly with General Dynamics, British Aerospace Corporate Jets, Butler Aviation.

Ÿ          Julian Browne,-> Senior Advisor - Formerly with Thales International, Westland Helicopters, and the British Army.

Ÿ          Thomas A. Corcoran,-> Senior Advisor - President of Corcoran Enterprises, the former President and CEO of Gemini Air Cargo, the former President and CEO of Allegheny Teledyne Incorporated, President and COO of Lockheed Martin, and various senior management positions with Martin Marietta and GE Aerospace.

Ÿ          Louis J. Giuliano->, Senior Advisor - The former Chairman, President, and CEO of ITT Industries and a former President of Allied-Signal‘s Avionics Systems Group.

Ÿ          John P. Jumper, Senior Advisor-> - United States Air Force (Ret.), the former Chief of Staff of the Air Force and member of the Joint Chiefs of Staff.

Ÿ          Thomas W. Rabaut->, Senior Advisor - Formerly with BAE Systems, United Defense, FMC, and the United States Army.

Ÿ          David L. Squier->, Senior Advisor - The former CEO of Howmet Corporation.

Ÿ          Peter J. Clare, Managing Director - Formerly with First City Capital Corporation and Prudential-Bache Capital Funding.

Ÿ          Francis A. Finelli,-> Managing Director - A former legislative assistant responsible for defense, intelligence, and foreign affairs for Senator Dan Coats.

Ÿ          Ian Fujiyama, Managing Director-> - Formerly with Donaldson Lufkin and Jenrette Securities.

Ÿ          Adam J. Palmer, Managing Director-> - Formerly with Lehman Brothers.

Portfolio:

Key component’s of Carlyle’s Defense and Aerospace portfolio include:

Ÿ          Founded in 1981, Jamestown Pennsylvania based Combined Systems, Inc. (CSI) -> is an engineering and manufacturing firm that provides tactical munitions and crowd control devices to military forces and law enforcement agencies around the world. In April 2005, Point Lookout Capital Partners, L.P., a small New York City private equity firm, acquired a majority interest in CSI with Carlyle Mezzanine Partners providing debt financing. As part of the deal, the Carlyle Group took a minority stake in the firm.

Ÿ          DHS Technologies, LLC -> is the parent company for DHS Systems (DRASH) (shelters for the US Military), Reeves EMS (emergency medical products and accessories), CAMP Technologies (RTV Campers), and MilSys (UK) (rapidly deployable expeditionary equipment and backup technical & maintenance support and training to military and civilian customers). The parent company was formed by the Carlyle Group in July 2004.

Other current defense or aerospace investments include ARINC Incorporated ->, Aerostructures Corporation ->, Sequa Corporation-> , Vought Aircraft Industries-> , and Wesco Holding.

Past Defense Deals:

Noteworthy defense related deals completed by the Carlyle Group include the following:

Ÿ          Originally a division of FMC that made landing track vehicles during World War II, United Defense Industries -> was a leader in the design, development, and production of combat vehicles, artillery, naval guns, missile launchers, and precision munitions. In August 1997, the Carlyle Group acquired the company from FMC Corporation and the Harsco Corporation for US$850 (reportedly using roughly US$175 million of its own money and borrowing the rest). In December of 2001, the Carlyle Group took United Defense Industries public at US$19 a share for a market cap of $976.3 million. Over the next few years, it paired its share holdings through secondary stock offerings. Ultimately, the Carlyle Group profited US$1 billion from United Defense through recaps, dividends, and the IPO before completely cashing out in 2004 when British aerospace and defense giant BEA Systems purchased the entire company for US$4.2 billion.  

Ÿ          Founded in 1977 as Southwest Marine Holdings, United States Marine Repair -> was the largest non-nuclear ship repair, overhaul, and conversion company in the US. The Carlyle Group acquired the firm in 1997 with a US$25 million investment. In May of 2002, the Carlyle Group did an in-house deal and sold the firm to United Defense Industries for US$316 million - reportedly reaping US$150 million in cash proceeds.  

Ÿ          QinetiQ began as the scientific and research division of the British Ministry of Defense. In 2002 privatization deal, the Carlyle Group acquired a 33.8% economic stake in QinetiQ with an investment of GBP42 million while the rest of the firm remained in the hands of the Ministry of Defense (62.6%) or was made available to QinetiQ employees (3.7%). In February 2006, QinetiQ was listed on the London Stock Exchange in a controversial IPO that raised GBP1.296 billion and earned the Carlyle group GB227 million. By 2007, the Carlyle Group had sold off its remaining shares.  

The Bottom Line:

Although its defense and aerospace portfolio is just one of several industry portfolios, few other private equity or venture capital players come close to matching the connections, the reputation, or the clout that the Carlyle Group has established. With its unrivaled (and sometimes controversial) business and government connections around the world, the Carlyle Group is a private equity defense deal player that operates on truly global scale.  

Contact Information:

The Carlyle Group Headquarters:

1001 Pennsylvania Avenue, NW
Washington, DC 20004-2505
United States
inquiries at carlyle.com
Phone: 202 729 5626
Fax: 202 347 1818

Website: http://www.carlyle.com