Carlyle, uncovered(ish)

Carlyle’s S-1 filing – the document it has to lodge with the Securities and Exchange Commission in advance of its initial public offering – ran to well over 300 pages. But despite its door-stopping bulk, it still managed to leave out some fairly important pieces of information: when it plans to float, how many shares it intends to offer, what its ticker symbol will be, how it’s going to spend the proceeds, how much the whole thing is going to cost, how much time and money the founders spend on their private jet, and so on. All of this information will presumably emerge in the next few months – the IPO is not expected to happen until next year – but at the moment they’ve either been glossed over, or the relevant space left blank. Even some of the information that is there – including the $100 million Carlyle has said it plans to raise – will probably change.

This reticence does provide some obstacles to a full analysis of exactly how and why Carlyle is choosing to float now. And this question is not a trivial one. It’s not as though Carlyle’s peers that have already listed have enjoyed bounteous good fortune recently; most have seen their shares plunge in the last year. And it’s not as though Carlyle generally struggles to raise money from private investors. On the contrary, the US-based firm is a fundraising machine: our most recent PEI 300 list, published in May, found that in the last five years it had chalked up some $40.5 billion in commitments, making it the third-largest private equity firm in the world (behind only TPG and Goldman Sachs).

Tapping public markets requires Carlyle to disclose a great deal of information about its business that, until now, had remained for select eyes and ears only. That may turn out to be an uncomfortable experience for Carlyle at some point. But for interested onlookers, it also provides a fascinating glimpse into the way the firm works. Consider these juicy morsels from the S-1:

Carlyle now has $153 billion of assets under management. That’s up a massive 43 percent from last year, thanks largely to the acquisitions of fund of funds manager Alpinvest and hedge fund ESG. In 2003, the equivalent figure was a ‘mere’ $16 billion.

As a result, it earned $447 million in management fees for the six months ending 30 June – so nearly half a billion dollars, before it’s even bought anything.

Carlyle had some 556 investment professionals as of June 30 (296 in the Americas, 152 in Europe/ Middle East, 108 in Asia-Pac). So that’s about $800,000 worth of fees per person.

Nearly 40 percent of all Carlyle’s money comes from public pensions.

It has now invested $47 billion of its capital in private equity deals since inception, spread across 405 deals (as of 30 June). Its favourite sector has been telecoms/media, which has accounted for $9.4 billion of that.

For realised or part-realised assets assts, its gross IRR since inception has been 31 percent, with a multiple of 2.6x on invested capital.

Carlyle’s fee-related earnings for private equity fell to $53.8 million in the six months to 30 June, down from $87.7 million in the same period the year before. The firm said this was ‘primarily attributable to a net increase in expenses, primarily reflecting allocated overhead costs related to our continued investment in infrastructure and back office support’. That’s $34 million of extra cost – think of all the staplers and swivel chairs you could buy with that…

PE performance fees jumped to $965.9 million in the first half of this year – apparently because the unrealised assets in its buyout funds IV and V appreciated in value by almost a quarter.

“Senior Carlyle professionals, senior advisors and other professionals have invested or committed to invest in excess of $4 billion in or alongside our funds”. $4 billion of their own money – not a bad effort for 500 or so people.

So despite all the gaps, the S-1 was an illuminating document. Let’s hope Carlyle enjoys the process of revealing more as much as we’ll enjoy reading about it…