For the first time, AlpInvest’s management stands to gain a direct equity stake in firm, something that is nearly universal in the private equity industry.
Tjarko Hektor, an AlpInvest partner, said on Wednesday that he and his fellow managers were extremely excited about the deal, as together they stand to own 40 percent of the new unit. Carlyle will own the other 60 percent. (Voting control of the new unit will be split 50/50.)
“Every time management has a stake in their own business, it becomes a more exiting opportunity,” Hektor said.
Indeed. Part of the reason AlpInvest management is excited is that Carlyle is said to be laying the groundwork to follow its rivals,
A public listing would eventually allow AlpInvest’s current management, who until now had no ownership, to cash out of what would certainly be a multi-billion dollar stake.
AlpInvest currently manages more than $40 billion in private equity funds. Added to Carlyle’s $97.7 billion in assets as of September 2010, and $13 billion dollars in new commitments from APG and PGGM, and you have a behemoth that together will manage more than $150 billion in assets. That would eclipse the $100 billion managed by publicly listed KKR and the $103 billion managed by publicly listed Blackstone. Assuming the AlpInvest deal closes, the newly combined firm would be the world’s largest private equity investor.
Still, Hektor predicted that the deal will only make a slight difference in how AlpInvest operates, saying the firm will remain functionally separate. “Chinese walls” between the two units, he said, are a crucial part of the deal, and he predicted that because of the deal’s structure, the two firms would encounter no conflicts of interest. That said, he reckoned that the deal would enable AlpInvest to tap into Carlyle’s wealth of experience.
As for the $13 billion in new commitments from APG and PGGM, which together administer nearly $500 billion in funds for Dutch pensioners, Hektor said that AlpInvest would take its time to invest the new commitments. “AlpInvest is not in the business of deploying capital quickly,” he said.