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The Carlyle Group: Busiest Firm Of 2004? –

Last year was an eventful one for the buyout industry, and that’s putting it lightly. On all fronts-acquisitions, exits, fundraising-the industry stepped up the pace and showed dramatic increases in some areas and record-breaking highs in others. Deal volume hit an all-time high with $136.5 billion in disclosed buyout transactions; the year’s 55 buyout-backed IPOs earned a record-breaking $10.33 billion; and fundraisers saw limited partners commit more than $42 billion to the industry’s latest round of buyout and mezzanine vehicles, representing a 75% increase over 2003.

The Carlyle Group capitalized on all those trends in 2004. Last year, the Washington, D.C.-based firm was involved in 21 buyout transactions worth an aggregate total north of $11 billion. And if that wasn’t enough to keep the firm’s 300 investment professionals busy, it was also a party to two IPOs on U.S. exchanges-Dex Media Inc. (NYSE: DEX) and PRA International (Nasdaq: PRAI)-which raised a combined total of more than $1 billion. Carlyle did this all while raising eight funds, four of which held final closings during the year.

Among the larger of Carlyle’s recent deals is the firm’s teaming with Kyocera Corp. to purchase DDI Pocket, a Japan-based wireless voice and data services provider, from KDDI Corp. The 220 billion ($2.03 billion) deal closed in October with ownership stakes split three ways between The Carlyle Group (60%), Kyocera Corp. (30%) and KDDI (10 %).

Another recent billion-dollar-busting transaction that Carlyle invested in-this time with Bain Capital and Spectrum Equity Investors-was the $1.5 billion purchase of Loews Cineplex Entertainment Corp. from Onex Corp. and Oaktree Capital Management LLC last July.

But life isn’t always a cake-walk for The Carlyle Group. The firm’s ties to senior members of D.C.’s political machine, coupled with its investment focus on the defense and aerospace industries, have painted a target on it that some well-known conspiracy theorists have taken recent shots at.

However, Carlyle has been trying to step back a bit from its political connections-the same ones that helped the firm early on in terms of building credibility-and focus more on the firm’s track record and reputation as a means of sourcing deals.

Public perception aside, The Carlyle Group has come a long way since its 1987 founding. The firm has earned a gross IRR of 28% on the $11 billion in equity that it has invested over the past 17 years. Today, with more than 25 funds holding active investments and several new investment vehicles on the way (see fund story, page 27), The Carlyle Group has approximately $19 billion under management and spans the globe with 23 offices, including two that opened less than a year ago in countries identified by the firm as emerging markets: one in Shanghai and the other in Moscow.

Among the Carlyle Group’s 600-plus limited partners are Boeing Co., General Motors Corp., Northrop Grumman Corp., R.K. Mellon Foundation, Wellcome Trust, Abu Dhabi Investment Authority, Brunei Investment Agency, Tokyo Electric Power Co., American Airlines Inc., University of Texas Investment Management Co., Immofinanz Immobilien Anlagen AG. California Public Employees’ Retirement System (CalPERS) owns more than 5% of the firm.