- Carlyle initially invested in NEP in 2016
- Crestview invested in 2012
- Long-dated fund gives firm flexibility to hold investments longer
Carlyle Group raised its long-term hold fund at just the right time. After less than two years, the long-term vehicle, called Carlyle Global Partners, has backed eight companies and is back in the market with a sophomore vehicle.
Carlyle declined to talk about fundraising, but Matt Coles, vice president with Carlyle Global Partners, agreed to give Buyouts an update on the debut fund and how its investment in NEP Group fits into its overall strategy.
Carlyle Global Partners closed on $3.6 billion in 2016 with the aim of focusing on investments with a longer hold horizon than normal PE investments, which managers generally try to sell within three to five years.
NEP Group fit the bill for the long-dated fund because “the value creation strategies the company has are well matched with a long-term partner,” Coles said.
Those growth goals include continuing its international expansion and building its customer base, Coles said. Also, the long-dated fund allowed flexibility in Carlyle’s NEP investment.
Carlyle initially invested in the company in 2016 alongside Crestview Partners. Part of Carlyle’s thesis was that Crestview, which first invested in NEP in 2012, was likely to look for an exit of NEP over the next few years, Coles said. That would give Carlyle the opportunity to build on its stake in NEP. The longer hold period gave Carlyle the flexibility to invest more when Crestview looked to exit, he said.
“There was always the potential that at some time and point in the future, we may have the opportunity to acquire the rest of the company. That structure … is relatively unusual when deploying a significant amount of new equity over two years into a new investment, which you would struggle to do if you had a traditional five-year holding period,” Coles said.
Carlyle’s initial investment provided additional capital to fund acquisitions and organic growth initiatives, provided existing shareholders with partial liquidity while allowing Crestview to retain co-control of NEP and compound its existing investment, “while not restricting its exit rights,” according to a person with knowledge of the transaction.
NEP provides technical management, production support and engineering for live televised sporting and entertainment events. The Pittsburgh, Penn.-based company has more than 3,500 employees and operates in 24 countries.
NEP has been private equity-backed for years. Crestview invested in the company in 2012, buying its stake from American Securities, which bought it from Apax Partners and Spectrum Equity in 2007. Those firms bought their stake from Wachovia Capital in 2004.
Carlyle’s long-term team is made up of 14 professionals in New York and London. The group has made eight investments since inception. Other investments include Schon Klinik, a German hospital clinic operator that plans to expand internationally, and Arctic Glacier, which produces and distributes packaged ice.
“If you look across the investments, the common theme really is duration,” Coles said. “We are targeting leading businesses with high barriers to entry, which makes creating value more likely over time.”
Schon Klinik was looking for a partner with European healthcare expertise that would work alongside the founders over a seven- or eight-year or more period to expand the business internationally. Arctic Glacier was also a long-term platform expansion, Coles said.
“We’re much more open in this fund to partner with either families or management teams that have a desire for someone to work with them beyond the traditional five-year period,” he said.
LP sources have told Buyouts Carlyle is raising its second long-duration fund, though a target on Fund II is unclear.
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