The Carlyle Group has been tossed about in conspiracy theories of all kinds since its founding in 1987, most of which focus on the firm’s distinguished partners. And while the firm hasn’t said it’s shedding its image as a high-profile boys club for ex-politicos, it has made moves to erase the perception of Carlyle as a landing pad for Republican politicians leaving public office.
What Carlyle loses in government insiders, it gains in operational veterans. In early 2003, the firm brought in former IBM CEO Louis Gerstner as chairman, replacing Frank Carlucci, the former secretary of defense and deputy director of the CIA, who became chairman emeritus of Carlyle. In October, Pres. George Bush Sr. announced his retirement from the firm and in November Carlyle hired former Northrop Grumman Chairman and CEO Kent Kresa.
Kresa says he doesn’t know what Carlyle’s motives were for his hiring, but the move confirms that the firm will stick close to defense deals. During Kresa’s tenure as head at Northrop, the company made roughly $26 billion in acquisitions, including the Grumman Corp. purchase and the deal for Westinghouse’s defense business.
“I understand the dynamics of the defense industry,” says Kresa.
Meanwhile, defense deals are under a higher level of scrutiny from lawmakers. Carlyle saw this when making its investment in QinitiQ. The British press claimed Carlyle’s influential payroll gave it too much authority over QinitiQ’s defense research.
Kresa, however, would not comment on the current climate for international defense deals or its effect on private equity.