The Carlyle Group in July capped Carlyle Europe Partners (CEP), its maiden European fund, at ecu 1 billion, twice its original target.
Whereas other recent US-based entrants to the European private equity market have relied largely on support from their domestic backers, Carlyle also successfully courted European institutions, rounding up some 40% of CEP from sources outside the US. European investors in the fund include Credit Agricole, Credit Lyonnais, Commerzbank, Nestle and Swiss Re.
Many backers of Carlyle’s US buyout funds also feature among CEP’s participants.
According to press reports, US institutions committing to CEP include AIG Global Investment Corp, AMR Investment Services, BankAmerica Capital, Bankers Trust Corp, CalPERS, Citicorp, the Delaware public pension board, Michigan Department of Treasury and the World Bank pension fund.
Carlyle has already invested substantial resources in its bid for a strong market position in Europe. It has established teams its four principal target markets – the UK, France, Germany and, most recently, Italy, where former Sopaf partner Edoardo Lanzavecchia has been appointed to head the operation. Carlyle’s European team is co-headed by Jean-Pierre Millet, based in Paris, and Dr Hans Albrecht in Munich. Christopher Finn heads the London office.
Formidably well-connected among politicians and industrialists in the US and chaired by Frank C. Carlucci, former US Secretary of Defense, Carlyle has succeeded in assembling a similarly heavyweight advisory board for the European fund.
Notable in the US for its focus on investment in defence, aerospace, telecommunications and healthcare, Carlyle will adopt a similarly focused approach to investment in Europe. Frank Carlucci commented “We believe that many of the areas on which we have focused in the US will also be fruitful for effective private equity investments [in Europe] in the coming years”. However, it would be misleading to assume that Carlyle’s European investment profile will be a carbon copy of its US interests, Jean-Pierre Millet said, although close sector focus will be a crucial feature of the European fund’s investment strategy. Jean-Pierre Millet went on to explain the rationale for sector concentration. “The more money there is available for European private equity, the greater the need for focus. While ten years ago, capital was the scarce commodity, now funding is readily available and good deals are in short supply.
“If full prices are being paid, then deep sector knowledge is critical to generating good returns”.
For the time being, Carlyle will seek to access a broad European deal flow to enable it to spot opportunities and develop a unique investment focus. The group took its first major step along this path with the ecu 200 million buyout of a French company, Genoyer (story, page 25), which is one of the world’s leading fluid piping manufacturers.
Carlyle was formed in 1987 and has bided its time before launching CEP, its first non-US vehicle. However, CEP appears to be only a first step in an ambitious and concentrated internationalisation programme. The launch of an Asian fund with a goal of around $1 billion (ecu 900 million) is imminent, and sources state that funds targeting Russia and Latin America are already waiting in the wings. Carlyle is also preparing itself for a third domestic fund-raising effort now that nearly three quarters of the $1.3 billion Carlyle Partners II fund has been deployed.