William Cohen, the former US secretary of defence under President Bill Clinton, has announced the formation of merchant bank TCG Financial Partners and plans to raise a $300 million (€248 million) fund to invest in defence-related companies.
The launch of the new firm – with offices in New York and Washington, DC – was officially announced last month, when Cohen hosted a select group of defence and government IT industry leaders to discuss issues impacting US Department of Defence budget priorities. C. Edward Carter, former head of US investment baking at Bank of America, will lead the venture. In addition, Cohen reportedly will add to his team from The Cohen Group – the namesake firm set up January 2001 to provide consulting and lobbying services for multinational clients – including retired US general Joseph Ralston, supreme Allied commander in Europe until 2003, and George Roberts, a former NATO secretary-general.
In addition to his work at Cohen Group, the ex-defence chief has also served as vice chairman of the board of advisors at Thayer Capital Partners since early 2001. The Washington, DC-based firm manages $1.5 billion in three private equity funds, and invests in industrial products and services.
TCG will focus in four broad segments: diversified aerospace and defence, government IT services, defence electronics and technical services. Once the advisory side starts generating money, the merchant bank will raise a private equity fund to invest in companies with revenues of $25 million to $150 million, the firm said. A recent Bloomberg report compared the projected path of the new firm to that of The Carlyle Group’s, though Carter was quoted as saying that TCG will stay “under Carlyle’s radar” by looking at smaller deals. The firm is betting that constraints on the US defence budget and the Pentagon’s need for new technologies will spur contractors to spin off business units and buy smaller technology firms.
The US defence industry is a potentially lucrative sector, though difficult to break into due to heated competition for a limited number of deals. Global heavy-hitters like Carlyle, who earlier this month appointed managing director Peter Clare as new head of its global aerospace, defence and government services group, dominate the landscape and have the veteran edge. Another example is New York defence investor Veritas Capital, who just last month acquired McNeil Technologies, a security and intelligence company that services the US military, national security and Homeland Defence market.