All YOU WANTED TO KNOW
In agentsmiley@y..., "Ken Smith" <shining@v...> wrote: Subject: CARLYLE GROUP - all you want to know
Subject: CARLYLE ASIA PARTNERS, L.P.
CARLYLE ASIA PARTNERS, L.P. Fund Overview Carlyle Asia Partners, L.P. and affiliates (Carlyle Asia or the "Fund") is a Pan Asia private investment firm. It originates structures and acts as lead equity investor in buyouts, strategic minority investments and privatizations in partnership with experienced management throughout Asia, outside of Japan. Carlyle Asia focuses on investments where it can add value and where Carlyle Asia can exercise significant influence or control. On December 31, 1999, the Fund closed with commitments of US$ 750 Million. Within Asia, the Fund will principally invest in China, Korea, Hong Kong, Indonesia, Malaysia, the Philippines, Singapore, Taiwan and Thailand. In addition to Carlyle Asia's investment team and the worldwide resources of the Carlyle Group, Carlyle Asia draws on the advice of distinguished businessmen and former government leaders (see list of Advisory Board Directors). It has established offices in Hong Kong, Seoul,and Singapore.
The Carlyle Group has successfully invested in a number of industrial areas such as aerospace, information technology services, defense, healthcare, environmental services, telecommunications, food processing, bottling, retail and wholesale distribution. While Carlyle Asia seeks to utilize the Group's worldwide expertise in making acquisitions, it also considers opportunities in other areas where it can add value. Carlyle Asia's first investment in Taiwan Broadband Communications ("TBC") drew on the expertise of Carlyle's telecommunications group as well as Carlyle's experience through its investment in Prime Communications and Genesis Cable. In partnership with several Taiwan based investors, Carlyle Asia committed in excess of US$ 100 Million to TBC. TBC currently provides cable television to over 250,000 customers in Taiwan and plans to provide internet and telephony access in the near future.
While Carlyle Asia often sponsors management teams in acquiring majority stakes in companies in order to facilitate their expansion and growth, Carlyle also actively pursues joint purchases with strategic buyers. These buyers may be multinational companies seeking to acquire businesses in Asia or Asia businesses seeking to expand. Like its sister funds in the US and Europe, Carlyle Asia supports trade buyers seeking to acquire businesses without consolidating the potential acquisitions debt or good will on their balance sheets, or the sizes of which are too great for their existing assets. Similarly, Carlyle Asia can fund growth strategies of corporate divisions of Asian or multinational conglomerates that otherwise could not obtain sufficient funds from their corporate parent.
INVESTMENT COMMITTEE William E. Conway, Jr. Daniel A. D'Aniello David M. Rubenstein
INVESTMENT TEAM MANAGING DIRECTORS Michael ByungJu Kim - Seoul Eugene Lai - Singapore Robert I. Wolk- Hong Kong XD Yang- Hong Kong Gregory M. Zeluck - Hong Kong
PRINCIPALS K. C. Kung - Hong Kong James Yoon - Seoul
VICE PRESIDENTS Janine Feng - Hong Kong Ian Fujiyama - Hong Kong Andy Shinn - Seoul
SENIOR ASSOCIATE Jay Bu - Seoul Christina Ng - Hong Kong
ASSOCIATES Yu Chen - Hong Kong Steven Ham - Seoul TC Kong - Hong Kong Edward Man - Hong Kong
INVESTOR REPORTING John F. Harris Susan Healy Thomas Mayrhofer
THE CARLYLE ASIA PARTNERS FUND - Advisory Board
The Honorable George Bush Senior Advisor of Carlyle Asia Advisory Board Former US President. Former Texas Representative in US House of Representatives. Former US Ambassador to the United Nations. Former Chairman of Republican National Committee. Former Director of the Central Intelligence Agency. Former Chief of US Liaison Office in China.
Hareb Masood Al-Darmaki Executive Director of the Abu Dhabi Investment Authority.
Bader M. Al-Humaidhi General Director of the Kuwait Fund for Arab Economic Development.
James A. Baker III SENIOR COUNSELOR
Mr. Baker has served at the senior levels of the U.S. government under three different Presidents. He served as the nation's 61st Secretary of State from January 1989 through August 1992 in the Bush Administration. During his tenure at the State Department, Mr. Baker traveled to 90 foreign countries as the United States confronted the unprecedented challenges and opportunities of the post Cold War era. Mr. Baker served from 1985 to 1988 as the 67th Secretary of the Treasury in the Reagan Administration. Mr. Baker has been the Senior Counselor at The Carlyle Group since 1993. Prior to his service as Secretary of the Treasury, Mr. Baker was President Reagan's White House Chief of Staff from 1981 to 1985. Mr. Baker's record of public service began in 1975 as President Ford's Under Secretary of Commerce. It concluded with his service once again as White House Chief of Staff for President Bush from August 1992 to January 1993. Mr. Baker received the Presidential Medal of Freedom in 1991 and has been the recipient of many other awards for distinguished public service, including Princeton University's Woodrow Wilson Award, The American Institute for Public Service's Jefferson Award, Harvard University's John F. Kennedy School of Government Award, The Hans J. Morgenthau Award, The George F. Kennan Award, the Department of the Treasury's Alexander Hamilton Award, the Department of State's Distinguished Service Award, and numerous honorary academic degrees. Partner, The Carlyle Group. Former US Secretary of State. Former Secretary of the Treasury. Former White House Chief of Staff.
Frank C. Carlucci CHAIRMAN
Mr. Carlucci has been a Managing Director of Carlyle since 1989 and the Chairman since 1993. Mr. Carlucci was Secretary of Defense from November 1987 through January 1989, following his service as Assistant to the President for National Security Affairs under President Reagan. Before serving in these positions, Mr. Carlucci was Chairman and Chief Executive Officer of Sears World Trade, Inc. Mr. Carlucci preceded his affiliation with Sears World Trade, Inc. with a career in government spanning over 25 years and positions from Ambassador to Portugal to Deputy Director of Central Intelligence to Deputy Secretary of Defense. Mr. Carlucci graduated from Princeton University in 1952 and attended the Harvard School of Business Administration. Mr. Carlucci presently serves on the Board of Directors of a variety of corporations, including: Ashland Inc.; Kaman Corporation; Pharmacia & Upjohn Inc.; The Quaker Oats Company; and Texas Biotechnology Corporation. He is also Chairman of the Neurogen Corporation Board of Directors, Nortel Networks Board of Directors and the US-ROC Taiwan Business Counsel. Among Mr. Carlucci's awards and honours are the Herbert Roback Memorial Award (1989); George C. Marshall Award (1989); Honorary Doctor of Laws Degree, University of Scranton (1989); the James Forrestal Memorial Award (1988); Woodrow Wilson Award (1988); Presidential Citizens Award (1983); National Intelligence Distinguished Service Medal (1981); Distinguished Intelligence Medal (1981); Defense Department Distinguished Civilian Service Award (1977); Health, Education and Welfare Distinguished Civilian Service Award (1975); and State Department Superior Service Award (1971). Chairman, The Carlyle Group. Former Secretary of Defense. Former National Security Adviser. Former Chairman and Chief Executive Officer, Sears World Trade. Former Ambassador to Portugal. Member of Boards of Ashland, Inc.; Kaman Corporation; Neurogen Corporation; Northern Telecom Limited; Pharmacia & Upjohn Inc.; The Quaker Oats Company; and Texas Biotechnology Corp. In addition, Mr. Carlucci serves on the Board of Trustees of the RAND Corporation.
Jason S. Chang Chairman and Founder of ASE Inc. and ASE Test
Ho Ching President and CEO of Singapore Technologies Pte.,Ltd.
Liu Hong-Ru Former Deputy Governor of the People's Bank of China. Former head of the Securities Exchange Control Commission of China.
Oscar M. Lopez Chairman of Benpres Holdings Corporation. Senior family member of the Lopez Group.
Professor Yuan Ming Director of the Institute of International Relations, Peking University.
Anand Panyarachun Former Prime Minister of Thailand. Chairman of Saha-Union Public Co Ltd.; Union Textile Industries; Eastern Star Real Estate; the Thailand Development Research Institute Foundation; the Council of Trustees of Thailand Environment Institute; the Thailand Business Council for Sustainable Development; the Kenan InstituteAsia; General Electric's Asia Pacific Advisory Board; and the International Advisory Board of The Carlos P. Romulo foundation. Director of Union Footwear; Sime Darby Malaysia; and Siam Commercial Bank. Serves on the Boards of the International Advisory Board of General Electric; the IBM Asia Pacific Board; American International Group's International Advisory Board; the International Advisory Board of Council on Foreign Relations (New York); and the Asia-Pacific Advisory Board of Unocal Asia-Pacific Ventures Ltd. UNICEF Ambassador for Thailand.
Fidel Ramos Former President of the Phillippines. Former Secretary of Defense for the Phillippines. Former Chief of Staff for the Phillippines.
Frank Shrontz Former Charman of the Board, President and CEO for The Boeing Corporation. Member of Boards for Boise Cascade Corporation; Minnesota Mining and Manufacturing (3M) Company; and the Chevron Corporation. Former Assistant Secretary of Defense
Arifin Siregar Former Governor of the Indonesian Central Bank. Former Ambassador to the U.S.A.
Sofjan Wanandi Chairman of the Indonesian Business Counsel.
Tan Sri Dato' Francis Yeoh Sock Ping Managing Director of the YPL Corporation Berhad, in Malaysia.
http://web.archive.org/web/20010628163755/www.thecarlylegroup.com/html /funds/cap/fund_cap_portfolio.html Portfolio companies:
Koram Bank; South Korea National Commercial Bank http://english.goodbank.com/
Mercury Corporation; South Korea Telecommunications Equipment Mercury Corporation ("Mercury" or the "Company"), was established to acquire the telecommunication equipment businesses of Daewoo Telecom Limited ("DT"), a subsidiary of Daewoo Group in Korea. Mercury is one of the leading manufacturers and suppliers of telecom equipment serving the largest network operators and service providers in Korea. Mercury's operations consist of three businesses, the Network division brought in 64% of 2000 revenues, the Fiber Optic Cable Division accounted for 18% of 2000 revenues and the Switching division also brought in 18% of 2000 revenues. In November 2000, a consortium of Carlyle, CVC Asia Pacific Limited ("CVC") and PPM Ventures ("PPM") acquired 100% of the assets of Mercury for approximately US$330 million. The transaction was funded by US$150 million of equity and approximately US$180 million of bank debt. Of the total $150 million equity investment, Carlyle invested approximately $49 million, representing 32.6% of the equity. Carlyle, together with CVC and PPM, own 90% of Mercury with the balance owned by management.
Mercury recorded strong financial results for the year ended December 31, 2000. The company reported revenues of $450.8 million and EBITDA of $85.5 million, both of which exceeded budget by more than 10%. Key Events · Mercury achieved higher sales from network transmission products in 2000 mainly driven by higher sales to Hanaro Telecom of Alcatel DSLAM equipment of approximately US$45 million. The company is in the process of qualifying a new DSLAM product with Korea Telecom with potential sales of US$30-60 million expected in 2001. If achieved, potential DSLAM sales to Korea Telecom will help to offset projected declines in DSLAM sales to Hanaro and TDX switching sales to Korea Telecom in 2001. · The Fiber Optic Cable division continues to grow to meet increasing demand both domestically and internationally. The Board has recently approved the installation of additional fiber drawing towers which will expand fiber drawing capacity by 40%. This expansion will cost approximately $6 million. · Mercury recently established an alliance with Nortel Networks to jointly develop IMT-2000 switching systems in Korea targeting Korea Telecom (one of the two 3G wireless license holders in Korea). Since the completion of the transaction in mid-November Mercury has strengthened its management team by adding a Chief Financial Officer, who is an experienced former IBM finance executive. The company is also in the process of recruiting a Chief Operating Officer.
Taiwan Broadband Communications, LTD; Taiwan Cable television systems Taiwan Broadband Communications, Inc. In July 1999, Carlyle Asia Partners acquired a controlling interest in Taiwan Broadband Communications Co. Ltd. ("TBC" or the "Company"). TBC was incorporated to acquire and manage cable television systems in Taiwan on behalf of Carlyle Asia and its affiliates. The Company will function as the multiple-systems operator (the "MSO") for all acquired systems. TBC is Taiwan's first professionally-operated MSO and one of four local consolidators of cable television businesses. The Company acquired majority ownership of the major cable television systems within the South Taoyuan franchise area during October 1999, and in the first quarter of 2000 acquired three additional cable television systems (the "New Systems") in Taiwan. The Company plans to further expand its subscriber base by acquiring cable television systems in other franchise areas in Taiwan with a goal of ultimately providing service to at least 500,000 subscribers. With the addition of the New Systems, the franchise area represents approximately 445,000 households and 276,000 "paying" subscribers. Throughout Taiwan, cable consolidators within franchise areas are dramatically improving the quality of service while increasing subscriber fees from as low as US$6.10 per month to the current government approved rate of US$18.20 per month. Previously, in franchise areas where subscription rates have been increased, experience to-date has not shown a marked drop-off in number of subscribers as a result of rate increases.
Subject: CARLYLE HIGH YIELD PARTNERS, L.P.
CARLYLE HIGH YIELD PARTNERS, L.P.
Fund Closing Date: May 20, 1999 $1,000,000,000
Fund Overview Carlyle High Yield Partners, L.P., a Delaware limited partnership (the "Fund"), was established by The Carlyle Group (together with its affiliates, "Carlyle") to acquire and actively manage a diverse portfolio of primarily below investment-grade debt and equity investments (the "Fund Investments"). Carlyle views the Fund as a natural extension of its existing investment activities. The Fund has $1 billion of committed capital, with the Fund Investments consisting of:
loans, which include a wide variety of floating rate assets, including purchases of, assignments of, participations in and other interests in debt instruments, including term loans and revolving loans originated by banks and other commercial loans, and other floating rate loans and investments, including interim loans and senior subordinated loans (collectively, "Bank Loans");
public high yield debt securities and Rule 144A high yield debt instruments ("High Yield Debt");
privately-placed subordinated debt securities and other subordinated obligations that are issued by public or private issuers, convertible debt and equity securities and other preferred equity investments ("Mezzanine Investments"); and
public and private equity and non-performing debt obligations (collectively, "Public and Private Equity and Distressed Debt").
The Fund will not invest in any emerging markets investments.
INVESTMENT TEAM MANAGING DIRECTORS Jack S. Mann Michael J. Zupon
PRINCIPAL Mark L. Alter
VICE PRESIDENTS Janegail Orringer Linda M. Pace Eric Sappenfield
ASSOCIATES Pamela E. Gelles
ANALYSTS Justin Burk Roy Schaham
TRADE ASSISTANT Anne-Sophie Combe Kaitlin Trinh
INVESTOR REPORTING Gary A. Bleiberg Anna Beyder Tara Looby
http://web.archive.org/web/20010709001850/www.thecarlylegroup.com/html/funds/chyp/fund_chyp_str.html Fund Structure
http://web.archive.org/web/20010709000944/www.thecarlylegroup.com/html/funds/chyp/fund_chyp_gen.html CARLYLE HIGH YIELD PARTNERS, L.P.
The General Partner The general partner of the Fund is TCG High Yield, L.L.C., a Delaware limited liability company (the "General Partner") and an affiliate of Carlyle. The General Partner, which is based in New York, is responsible for managing the Fund Investments. Pursuant to an Investment Advisory Agreement, Carlyle Investment Management, L.L.C., a Delaware limited liability company (the "Investment Advisor"), advises the Fund in making Fund Investments. The Investment Advisor, an affiliate of Carlyle formed in 1996, provides investment advice to Carlyle, Carlyle Partners II, L.P., Carlyle Venture Partners, L.P., Carlyle Europe Partners, L.P. and Carlyle Asia Partners, L.P.
Jack Mann, a Managing Director of the Fund and former head of Merrill Lynch's High Yield Capital Markets and Syndicate Group, leads the General Partner. Mr. Mann, who comes to Carlyle with twelve years of capital markets experience at Merrill Lynch, has a detailed knowledge of the high-yield debt and private equity markets as well as strong relationships within the financial community. In addition to Jack Mann, the General Partner consists of a team of experienced investment professionals that includes Michael Zupon, a Managing Director of the Fund
http://web.archive.org/web/20010709001346/www.thecarlylegroup.com/html /funds/chyp/fund_chyp_incom.html CARLYLE HIGH YIELD PARTNERS, L.P.
Investment Committee Fund oversight will be managed through an Investment Committee, which was established to review investment proposals, oversee Fund Investments and formulate operating guidelines for investment asset allocation, interest rate hedging and other investment strategies. The Investment Committee will act in consultation with the Credit Committee, taking into consideration both the targeted returns and investment objective of the Fund.
Messrs. Conway, D'Aniello, Rubenstein and Mann will serve as members of the Investment Committee, which will be chaired by Bill Conway, Jr. In addition, the Investment Committee will include one or more designated industry specialists from Carlyle who will be accessible to the Investment Committee and who will be interchangeable with other Carlyle industry specialists based upon the specific issuer and/or industry being presented to the Investment Committee for consideration.
CARLYLE HIGH YIELD PARTNERS, L.P.
Credit Committee The General Partner oversees all operations, including analysis, trading and other related matters. Investment decisions will be made by the Credit Committee, which will initially include Jack Mann and Michael Zupon, the Fund's Bank Debt Portfolio Manager. The Credit Committee will hold daily meetings to review individual credits, developments in the capital markets, and to provide trading parameters for the senior trader of the Fund. The Credit Committee will actively manage the Fund's portfolio based on fundamental and technical analysis.
The Credit Committee will manage the ongoing daily operations of the Fund using an established, industry-accepted and specifically customized trading system and databases to monitor the performance of individual credits and price movements, and to ensure compliance with the terms of the Indenture and Credit Agreement. The Credit Committee will closely monitor all investments through regular meetings with management and equity sponsors. Buy and sell decisions will be the result of intensive credit surveillance and participation in the bank loan and high yield new issue calendar and secondary market.
http://web.archive.org/web/20010709001408/www.thecarlylegroup.com/html/funds/chyp/fund_chyp_inph.html CARLYLE HIGH YIELD PARTNERS, L.P.
Investment Philoshophy The General Partner's objective is to achieve superior returns by capitalizing on the depth and breadth of expertise of its senior management, the Investment Advisor and Carlyle in making leveraged investments. Jack Mann, Michael Zupon, and the other senior managers of the General Partner have extensive experience and expertise in making underwriting and investment decisions with leveraged companies and have developed extensive relationships in the High Yield Debt and leveraged Bank Loan communities. Carlyle will provide the General Partner and the Investment Advisor with access to: (i) the detailed industry knowledge possessed by its investment professionals; (ii) its significant proprietary deal flow; and (iii) its portfolio companies, their management and strategic investors.
The value and composition of the Fund Investments will vary over time and will be affected by, among other things, certain portfolio limitations imposed on the Fund under the Credit Agreement and the Indenture and changing market conditions that, in the opinion of the General Partner, may warrant a different allocation of the Fund Investments. As such, the actual asset mix is likely to vary, perhaps significantly depending upon market and financial conditions, from the proposed targets below:
Asset Group Targeted Asset Mix Bank Loans 20% High Yield Debt 55% Mezzanine Investments 10% Public and Private Equity and Distressed Debt Investments 15% Total 100% http://web.archive.org/web/20010709001945/www.thecarlylegroup.com/html/funds/chyp/fund_chyp_invstr.html
CARLYLE HIGH YIELD PARTNERS, L.P.
Investment Strategy The General Partner's investment strategy is to create a leveraged portfolio of high yielding debt and equity securities in companies with attractive fundamental characteristics. The General Partner will draw upon the expertise of Messrs. Mann, Zupon and its other senior managers and the partners and senior executives of Carlyle in identifying suitable debt and equity investments. The General Partner will emphasize preservation of capital by employing: (i) a thorough analysis of each issuer, focusing on industries that have historically demonstrated limited performance volatility and above average cash flow growth; (ii) active trading management of the portfolio, seeking to exit individual investments or sectors as conditions change; (iii) portfolio diversification to minimize exposure to any individual investment; (iv) use of advanced hedging techniques to protect the portfolio from interest rate and currency exposure; and (v) the investment expertise, overall guidance and industry contacts of the partners and senior executives of Carlyle to complement those of the General Partner and the Investment Advisor.
Control of Risk The General Partner's strategy is intended to control risk. Accordingly, the General Partner's security selection process is inherently defensive, although the Fund may invest in cyclical industries where the General Partner determines that an investment meets its investment criteria.
Comprehensive Due Diligence and Research The foundation of the General Partner's strategy is intensive investment research and analysis. The General Partner intends to follow a rigorous process based on a comprehensive analysis of issuer creditworthiness, including a quantitative and qualitative assessment of an issuer's business, an evaluation of management, an analysis of business strategy and industry trends and an in-depth examination of capital structure, financial results and projections.
Flexibility in Making Investments A key element of the General Partner's philosophy is a willingness to be highly flexible in making investments. The General Partner will consider senior versus subordinated debt, current versus deferred return securities and other appropriate alternatives.
Active Investment Monitoring The Credit Committee will actively monitor all portfolio positions, execution levels and trading performance with the aid of regular mark-to-market of all investments as required pursuant to the debt financing arrangements. The Credit Committee will closely monitor all investments through regular meetings and communication with management and equity sponsors. The Credit Committee will hold daily meetings to review individual credits, market activity and the current trading environment. The Investment Committee will approve all purchases and sales of Mezzanine Investments, Bank Loans that provide interim financing and Private Equity as well as certain purchases and sales of Public Equity and Distressed Debt.
Value Based Investment Orientation The General Partner believes that superior performance can best be achieved by using a long-term investment approach. While general market factors change constantly and price movements can be at times dramatic, the General Partner believes that a market-timing pursuit of such price movements is both risky and potentially costly to implement.
Proprietary Transaction Flow The General Partner will proactively develop deal flow through its network of proprietary relationships. This includes the numerous contacts that the professionals of the Fund and Carlyle have daily with growth companies, issuers of securities, investment banks, commercial banks, other private equity funds, attorneys and accountants as well as the investment experience of its 100 investment professionals worldwide.
Subject: About the Carlysle Group
The Carlyle Group is a private global investment firm which originates, structures and acts as lead equity investor in management-led buyouts, strategic minority equity investments, equity private placements, consolidations and build-ups, and growth capital financings. Formed in 1987, The Carlyle Group has invested over $5.8 billion of equity in 213 corporate and real estate transactions with an aggregate acquisition value of over $16 billion. As of December 2000, the firm had more than $12 billion of capital under management. Separate teams of investment professionals manage funds dedicated to management-led buyouts and strategic minority investments, venture capital, and real estate investment opportunities. Carlyle also has a High Yield Fund which invests in leveraged loans, high yield bonds, mezzanine instruments and private equity. The firm conducts its investment activities through focused industry groups which leverage the extensive operating, corporate and governmental experience of its partners.
Carlyle's extensive transaction experience and network of global partners is a source of corporate opportunities unparalleled in the private equity investment community. Our goal is a simple one -- to generate extraordinary investment returns, while maintaining our good name and the good name of our partners.
Headquartered in Washington, DC, the firm serves a diverse base of nearly 390 Investors in 50 countries worldwide.
WORLDWIDE WASHINGTON, DC BANGALORE BARCELONA BELLEVUE CHARLOTTE DALLAS GREENWICH HONG KONG LONDON MILAN MOSCOW MUNICH NEW YORK NEWPORT BEACH PARIS RESTON RIYADH SAN FRANCISCO SEOUL SINGAPORE TOKYO
FOCUSED INDUSTRIES AEROSPACE & DEFENSE CONSUMER & INDUSTRIAL ENERGY HEALTHCARE INFORMATION TECHNOLOGY REAL ESTATE TELECOMMUNICATIONS & MEDIA
A lot of folks have wondered about who Carlsyle is and what they're doing. I was thrilled to find copies of their webpages they had before the Saudi/Bush/Carlysle connections became known.
Here's some of the info they removed from the web after the Carlsyle Group became controversial:
CARLYLE PARTNERS III, L.P.
Align Technology, Inc.; Santa Clara, California Orthodontic Products http://www.aligntech.com/html/Explore/explore_frameset.asp
CityNet Telecommunications, Inc.; Silver Spring, MD Metro-area broadband infrastructure company http://www.citynettelecom.com/index.swf
Forged Metals, Inc.; Fontana, California Producer of seamless rolled rings and open die forgings for jet engines, land-based turbines, and aerospace applications Grand Vehicle Works, LLC Grand Vehicle Works, LLC; Highland Park, Illinois http://www.forgeman.com/
Intelistaf Healthcare; Oak Brook, Illinois Healthcare Staffing http://www.intelistaf.com/
Grand Vehicle Works, LLC; Highland Park, Illinois Transportation Products http://www.google.com/search?q=Grand+Vehicle+Works% 2C+LLC&btnG=Google+Search
Panolam Industries International, Inc.; Shelton, Connecticut Laminate Panel Industry http://www.panolam.com/
The Relizon Company; Dayton, Ohio Document Management and e-Customer Relationship Management http://www.relizon.com/index.cfm
Videotron Telecom; Quebec, Canada Competitive Local Exchange Carrier providing local, long distance, internet access and data services http://www.videotron.com/portail_en/index.htm
Vought Aircraft Industries, Inc; Dallas, Texas Supplier of Aerostructures Assemblies http://www.vought.com/ http://web.archive.org/web/20001213053200/www.vought.com/company_info/leadership/pages/descript.htm http://web.archive.org/web/20010424174545/www.vought.com/suppliers/
Subject: CARLYLE ARABIA
http://web.archive.org/web/20010626192814/www.thecarlylegroup.com/html/funds/ca/fund_ca_content.html CARLYLE ARABIA
Fund Overview Carlyle Arabia has, since 1994, served the Saudi Arabian Government as official Advisor to its Economic Offset Program. A key objective of the Program is to facilitate private sector joint ventures within the Kingdom.
In addition, as The Carlyle Group expands its global private equity capabilities, the Carlyle Arabia team is focusing on selected investment opportunities inside Saudi Arabia.
Carlyle Arabia's team is made up of highly skilled professionals, with offices located in Washington, Riyadh and London. In addition, the team is supported by Carlyle's senior management, which combines extensive governmental, operational and merchant banking experience. CARLYLE ARABIA TEAM MANAGING DIRECTORS James K. Holman -International
PRINCIPAL Robert Dunn
DIRECTORS Ali Al-Daftari - International
ASSOCIATES Taimoor Labib - International
SENIOR ADVISORS David Burney - International Brian Lees- International
http://web.archive.org/web/20010216023255/www.thecarlylegroup.com/html/funds/ca/fund_ca_offset.html CARLYLE ARABIA
Saudi Arabia Offset Program - Overview The Economic Offset Program (EOP) is an innovative investment program established in 1984 to help form profitable businesses in Saudi Arabia. Designed to attract foreign investment, the program encourages joint ventures between foreign and Saudi companies which:
diversify the industrial base transfer technology strengthen the private sector employ Saudis reduce reliance on imports use local raw materials
Importantly, projects approved under the EOP enjoy investment incentives and the support of the inter-ministerial Economic Offset Committee (EOC).
What is Offset? Offset is commonly used by countries making major foreign procurements to ensure that a percentage of funds spent are re-invested to achieve economic development goals.
Offset programs of different varieties and forms are in place throughout the world, in both highly developed and developing nations.
Washington, D.C. 1001 Pennsylvania Ave, NW Suite 220 South Washington, D.C. 20004-2505
Phone: 202-347-2626 Fax: 202-393-4568
London 57 Berkeley Square London, W1X 5DH United Kindom
Phone: 44 207 894-1200 Fax: 44 207 894-1600
Riyadh New Al-Akariya Commercial Center, Suite 5404 Sitteen Street, Malaz, P.O Box 27040 Riyadh 11417 Saudi Arabia
Phone: 966 1 476-2237 Fax: 966 1 476-1160
mailing address The Carlyle Group - Offset, L.L.C. P. O. Box 26861 Riyadh - 11496 Kingdom of Saudi Arabia
More information at http://www.saudioffset.com/
Subject: Carlysle Europe Venture Partners
Carlysle Europe Venture Partners
The next generation internet, we believe, will lead to unprecedented value creation opportunities. Bandwidth expansion, everywhere connectivity, flexible networks, distributed and ubiquitous intelligence, and the inter-connectivity of devices will alter the face of communications as we know it.
The Carlyle Europe Venture Partners [CEVP] is one of the largest venture capital funds focused on Europe. Europe will experience unprecedented opportunities. The UK and the continent are already beginning to enjoy the benefits of regulatory liberalization, the emergence of common standards and the growth and mobility of capital.
CEVP invests in this next generation internet. The fund was created to provide entrepreneurs with the means to build companies along the entire internet value chain. CEVP's investment strategy concentrates on the following areas:
Communications Technology Communications Services Infrastructure Software Online Financial Services Online Services
We make investments in all stages of growth with a typical investment range of 3 - 20 million.
Carlyle Europe Venture Partners [CEVP] has invested in the following companies:
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Accucard Online credit card issuer http://www.google.com/search?q=Accucard&btnG=Google+Search
Alchemedia Secure DisplayTM Solutions Provider http://www.alchemedia.com/
AllBusiness Small business services and B2B exchange http://www.allbusiness.com/index.jsp
BFinance Business financial marketplace http://www.bfinance.com/bfinance.html
eGencia Corporate travel agency http://www.egencia.fr/egencia-wb-pa/scripts/wwwTMLite.exe/Home?guest=1
Global Name Registry Registry for domain names http://www.gnr.com/
Omiris Cross-border trading platform http://www.omiris.net/index_htm.htm
PacketLight Networks Next-generation optical systems for metro-access networks http://www.packetlight.com/
PipingHot Networks Broadband fixed wireless access system http://www.pipinghotnetworks.com/
Riot-E Wireless entertainment company http://www.riot-e.com/
SolSoft Visual Security Policy Management http://www.solsoft.com/
Surplex Surplex - Consolidator of European surplus assets http://www.surplex.com/servlet/SpxServlet
Trellis Photonics Photonic switching http://www.google.com/search?q=Trellis+Photonics&btnG=Google+Search
Zaffire Transport solutions for metropolitan area networks http://web.archive.org/web/20010401001017/www.zaffire.com/ http://www.zaffire.com/ was aquired by http://www.centerpoint.com/index.asp
http://web.archive.org/web/20010810130841/www.ecarlyle.com/whycarlyle.html CEVP brings to its portfolio companies a broad and diverse base of skills in entrepreneurship, venture capital, investment banking, operations, engineering, consulting, legal, sales, and marketing combined with deep sector expertise. The team also benefits from experience as investors in both European and U.S. companies.
THE TEAM IS LEAD BY Jacques Garaοalde MANAGING DIRECTOR
Jacques Garaialde leads the CEVP team and its investments in online services. Before joining Carlyle in March 2000, Jacques was a Senior Vice President at the Boston Consulting Group (BCG) and the Managing Partner of the Paris and Brussels offices. He started the Brussels office in 1992. From 1995 to 2000, these two offices tripled in size. During his eighteen years with BCG, Jacques covered the high-tech, telecom and energy sectors on issues of strategy, corporate development and organization. Prior to BCG, he worked two years with Exxon. Jacques received his MBA in 1982 from INSEAD, Fontainebleau, and graduated in 1979 from Ecole Polytechnique, Paris. He speaks French, English and Spanish.
Communications Technology Hossam Galal DIRECTOR Hossam leads telecommunications and networking technology investments for CEVP. Prior to joining Carlyle in April 2000, he made telecommunications technology venture investments for Deutsche Bank. Hossam has invested in companies across the telco/cable infrastructure, wireless infrastructure and data networking sectors. Prior to this, Hossam was part of the corporate advisory group at Deutsche Morgan Grenfell working on M&A and capital markets financings. Hossam began his career working with AT&T in the United States. He is a summa cum laude graduate of the City University of New York, with a degree in Computer Science/Engineering. Hossam also holds a Doctorate from Harvard Business School and is the author of numerous articles in the areas of management, business strategy and computer science.
Claudio Giuliano SENIOR ASSOCIATE
Claudio focuses on investments in the communications technology and telecommunications services sectors. He joined Carlyle in March 2001 from BainLab in Italy, where he took a key role in the investment process and managed the development of technology start-ups. During the earlier part of his career Claudio spent five years at Hewlett Packard working both in France and the US. He held a number of positions centred on the company's manufacturing, supply chain engineering and distribution operations. Claudio is a summa con laude graduate with a Master of Sciences in Electrical Engineering from Politecnico di Torino (Italy), a D.E.A. in Optoelectronics from INPG (France) and an MBA from INSEAD (France). In addition to his native Italian, Claudio speaks French and English
Vladimir Lasocki SENIOR ASSOCIATE Vladimir specialises in working on communications technology investments. Prior to joining Carlyle in April 2000, Vladimir was an associate with Deutsche Bank's principal investments group focusing on communications and networking technology venture investments. Prior to joining Deutsche Bank, he was with the corporate finance group of Paribas in Paris, London and Prague. Vladimir has a degree in business administration with a major in finance earned at EM Lyon and the Universite Libre de Bruxelles (Solvay Business School) and an MA in European Economic Studies from the College of Europe in Bruges. A French national, Vladimir also speaks English.
Communications Services Wouter Moerel DIRECTOR
Wouter joined Carlyle in March 2001 and leads CEVP's investments in the telecommunications services sector. He has eight years of telecommunications experience, most recently as a Vice President for JP Morgan, working with clients on corporate finance and M&A, and prior to that as Vice President of the European Telecommunications, Media and Technology Group for Lehman Brothers . Formerly Wouter was a strategic consultant with Coopers and Lybrand Consulting, focusing on wireless license bids and strategic advisory for both established telecom operators and new market entrants. During his career Wouter has worked closely with most of the industry's leading players as well as new entrants. Wouter, a Dutch national, speaks French, German, and English. He has an MBA from the University of Groningen (Netherlands).
Steve Rosengarten SENIOR ASSOCIATE
Steve focuses on telecommunications services investments. He joined Carlyle in April 2000, from the media and communications group at Lazard Freres. Prior to joining Lazard Freres, he was a lawyer with the corporate finance group at Chadbourne & Parke advising companies and investment banks on mergers and acquisitions and securities matters. Steve has an LLB. (honours) from The London School of Economics and an LLM. from Harvard Law School. A Belgian national Steve speaks, French, English, and German.
Lori Belcastro DIRECTOR
Lori focuses on investments within the infrastructure software sector. Prior to joining Carlyle in September 1999, Lori was a Vice President in the European Media & Communications Finance Group at BT Alex Brown International in London. While there, she focused on all aspects of advisory and financing services for high-growth companies in wireless and fixed line telecommunications, media and the Internet. Previously, Lori was with McKinsey & Company, where she held several positions in the Boston and London offices including Business Analyst, Associate and Engagement Manager. During her four years at McKinsey & Company, Lori served telecommunications, cable television, electronics and multimedia clients on a variety of strategic issues. Lori holds a Professional Engineer's degree and a Masters of Science degree, both in Electrical Engineering, from the Massachusetts Institute of Technology. She graduated summa cum laude from the University of Massachusetts where she received a Bachelors of Science degree in Electrical Engineering
Michael Wand DIRECTOR
Michael focuses on infrastructure software investments. Michael Wand joined Carlyle in April 2001 from Deutsche Bank, where he was Head of European Internet Research. There he led a team of six analysts covering companies emerging in the following categories: infrastructure, portals, e-tailing, and e-finance. Notably, Wand was ranked No.1 by the 2001 Reuters Survey (European Larger Companies) in the new category Internet Software & Services, following the same rating in Reuters European Smaller Companies (Technology) survey in 2000 and No. 1 by Extel for "Understanding the new economy". He was regarded as the lead analyst for most of the companies he covered including: Autonomy, Baltimore, BROKAT, Intershop, nCipher, Trintech, Utimaco, as well as VeriSign, Checkpoint, and RSA Security. Previously Michael was senior European Software Analyst for Paribas, and started his career as an analyst with BHF Bank in Germany covering Banks and Retailers. Michael holds an MBA from the University of Texas (US), as well as a BA in Business Administration from the University of Mannheim (Germany). In addition to his native, German, Michael speaks English and French. Nazo Moosa SENIOR ASSOCIATE
Nazo focuses primarily on investments in the infrastructure software and online services sectors. Prior to joining Carlyle, Nazo was an Associate with a San Francisco-based financial and strategic advisory firm focused on software and commerce opportunities. She also assessed technology opportunities at Sony Strategic Planning. Prior to Sony, Nazo served as the Senior Director of Marketing for a subsidiary of Thermo Electron Corporation, which experienced a successful IPO with a market capitalization of $1.0 billion. She graduated with honors from UCLA and received her MBA from Columbia Business School.
Online Financial Services
Fred Phillips DIRECTOR
Fred leads CEVP's investments in online financial services. Before he joined Carlyle in April 2000, Fred was based in Amsterdam and made technology venture investments in Europe and the US on behalf of ABN AMRO. He invested in companies in the internet, financial services, and life sciences sectors. Prior to this, Fred was a Vice President of Tescorp, then a NASDAQ listed company active in the cable and communications industry. Fred began his career working as a lawyer at Vinson & Elkins and the Department of Justice. He holds a JD from Yale University Law School, a masters in philosophy from Oxford University, and a bachelors in industrial relations from Cornell University. Fred also speaks Spanish.
Bahar Kural-Chawla SENIOR ASSOCIATE
Bahar focuses on investments in the online financial services sector. Before joining Carlyle in April 2000, Bahar was an associate in the Investment Banking Group of Morgan Stanley Dean Witter, focusing on the Internet and Retail. Prior to Morgan Stanley, she was a corporate finance analyst at Salomon Brothers Inc, New York in the Financial Institutions Group and the Technology Group. Bahar graduated from Columbia Business School with an MBA in 1999 and from Swarthmore College in 1994 with a BA in Political Science and Economics.
Andersen Cheng DIRECTOR OF OPERATIONS
Andersen joined Carlyle in April 2001, and is responsible for creating an infrastructure to support the investments teams and to increase the efficiency of the deal process. He also works with portfolio companies to help shape and develop a solid business infrastructure rapidly. Immediately prior to joining Carlyle, Andersen was European Head of Portfolio Development for LabMorgan ( JP Morgan's venture development organisation). In this capacity he developed and implemented the Lab's processes, and assisted portfolio companies in growing to plan. Andersen has managed a number of high-profile projects in his earlier roles at JP Morgan, Eagle Star Investment Managers and Threadneedle Investment Managers. Andersen holds an MBA and a BSc in Civil Engineering from Imperial College, London; and is also a fellow of the Institute of Chartered Accountants.
To find out, we peeked down the rabbit hole.
FORTUNE Monday, March 18, 2002
By Melanie Warner
Are you the sort of person who believes in conspiracies--the Trilateral Commission secretly runs the world, that sort of thing? Well, then, here's a company for you. The Carlyle Group, a Washington, D.C., buyout firm, is one of the nation's largest defense contractors. It has billions of dollars at its disposal and employs a few important people. Maybe you've heard of them: former Secretary of State Jim Baker, former Secretary of Defense Frank Carlucci, and former White House budget director Dick Darman. Wait, we're just getting warmed up. William Kennard, who recently headed the FCC, and Arthur Levitt, who just left the SEC, also work for Carlyle. As do former British Prime Minister John Major and former Philippines President Fidel Ramos. Let's see, are we forgetting anyone? Oh, right, former President George Herbert Walker Bush is on the payroll too.
The firm also has about a dozen investors from Saudi Arabia, including, until recently, the bin Laden family. Yes, those bin Ladens. Is it any wonder that Internet sites with names like paranoiamagazine.com are rife with stories about Carlyle's shadowy, corrupt global network? And it's not just wackos. "Be careful," a tech entrepreneur in Silicon Valley wrote in an e-mail when he learned I was doing a story on Carlyle. "The rabbit hole runs really deep on this one.''
Leaving aside the conspiracies for a moment, what exactly does the Carlyle Group do? Start with the basics: It's one of the world's largest and most powerful private-equity investment firms, meaning it buys and sells privately held companies and divisions of large public companies for big profits. Founded in 1987 (and named after the favorite New York hotel of the firm's first investors, the Mellon family), Carlyle has raised a total of $14 billion from investors in just the past five years--more than any other private-equity firm has attracted in the same period, except the Blackstone Group and CSFB Private Equity. Profits, too, have been pretty terrific. Not counting the standard 20% cut that goes to Carlyle's partners and managing directors, the firm's average annual rate of return has been 36%.
It's quite a success story, and to understand how Carlyle pulled it off, FORTUNE spent a month and a half peeking down that rabbit hole. One conclusion seems clear: While most of the conspiracy theories are amusingly overblown, this is a firm that's been built on the backs of Bush and other big shots who have lent Carlyle their names, their golden networks of friends in high places, and their insights into how government works. It wasn't until Carlucci joined, for instance, that Carlyle really took off. Founded by David Rubenstein, a lawyer who worked as an aide in the Carter White House, Bill Conway, a former CFO at MCI, and Dan D'Aniello, a former finance executive for Marriott, Carlyle early on invested in a motley assortment of deals--buying an airline-catering business, a health-food chain, and a biotech firm, for example. In 1990, Carlucci got the trio interested in the $150-billion-a-year U.S. defense industry, making introductions to companies that would turn into some of Carlyle's most lucrative investments. Rubenstein quickly realized the wisdom of recruiting a former Secretary of Defense and followed it up with a former Secretary of State, then a former White House budget director, and on and on.
The revolving door has long been a fact of life in Washington, but Carlyle has given it a new spin. Instead of toiling away for a trade organization or consulting firm for a measly $250,000 a year, former government officials can rake in serious cash by getting equity cuts on corporate deals. Several of the onetime government officials who have hooked up with Carlyle--Carlucci, Baker, and Darman, in particular--have made millions. Carlyle isn't the only organization doing it: Metropolitan West Financial in Los Angeles recently hired Al Gore to help with tech deals and make introductions overseas, for example. But Carlyle, which pioneered the idea, seems more adept at it than any other firm.
Unlike other private-equity groups, Carlyle concentrates on companies funded by the government, such as defense contractors, or those affected by government regulation, such as telecommunications firms, and then hires people with relevant government experience. As the company once put it in a brochure, "We invest in niche opportunities created in industries heavily affected by changes in governmental policies." Doing so, of course, raises the ultimate rabbit-hole question: Is Carlyle's approach just a smart twist on good old business networking or a step over the line into an ethical twilight zone in which the public trust is broken?
Half a mile from the White House, inside nondescript offices sparsely adorned with generic depictions of ships and ducks, co-founder Rubenstein sits with his hands folded on a table so shiny you can see your reflection. Next to him sits Chris Ullman, Carlyle's first-ever full-time PR person. Habitually wary of media attention, Rubenstein and his partners agreed to rare interviews with FORTUNE. That's because since Sept. 11 the firm has been under unusual fire. First there was the bin Laden thing. Shafig bin Laden, one of Osama's many brothers and a Carlyle investor, was in attendance at a Carlyle conference at a Washington hotel on that infamous day. As the media were quick to point out, this meant that George H.W. Bush was working for a firm that was helping to make the bin Ladens money. Even though the wealthy Saudi family has reportedly cut all ties to Osama, the press lambasted Carlyle.
The firm has since given the bin Ladens back their money, some $2 million, but controversy lingers. Sept. 11 and its aftermath also created the appearance of further conflicts of interest--namely, that while his son is in the Oval Office directing the war effort and proposing the largest increase in defense spending since Ronald Reagan, Bush is working for a firm that, through various investments, has become the nation's 14th-largest defense contractor. "It destroys the office of the presidency no less, in my view, than having sex with an intern," says Larry Klayman, director of the watchdog group Judicial Watch. On top of all that, there's the unfolding Enron saga and the likely passage of the campaign-finance-reform bill, which suddenly make it look bad for businesses to have too many friends in Washington.
It's no surprise, then, that Rubenstein is anxious to downplay the roles of Carlyle's famous people and to dispel the aura of mystery surrounding the firm. "The word I hate most is 'secretive,' " says Rubenstein, whose wry countenance and shock of white hair suggest a less rubbery version of Steve Martin. Rubenstein insists that all Bush does for Carlyle is give speeches to investors and that it is silly to think of him whispering in his son's ear about how to help Carlyle's companies.
On the whole, Rubenstein says, the big names at Carlyle do a lot less than most people think. "We don't lobby the government," he says, echoing a claim made by other partners interviewed by FORTUNE. He insists that if Carlyle is at all remarkable, it's because of the firm's innovative approach to private equity, its great returns, and its global ambitions--not because it happens to employ a few famous people. "Out of the 500 people at the firm, we have maybe eight or nine who served in government. The rest are your typical Harvard, Stanford, or Wharton MBAs, who do all the same things they do at other firms,'' says Rubenstein. (In fact, the number of former government big shots is 12, but who's counting?)
The conspiracy theorists like to imagine that Bush, Baker, and Major are jetting around the world cutting deals and making money for companies owned by Carlyle, but after nearly two dozen interviews with CEOs of current and former Carlyle companies and people familiar with Carlyle's business, it seems clear that this really isn't happening. What Bush & Co. actually do is far less pernicious but clearly valuable to Carlyle--they help raise money. Every year Rubenstein sets up scores of lunches and dinners around the world intended to woo new investors and gratify existing ones. As you might imagine, people like Bush, Baker, and Major are a huge draw. "If you call and say you're doing a dinner with Jim Baker or with George Bush, and could they please attend, chances are people are going to show up," explains a former employee, who, like all ex-Carlyle staffers I talked to, didn't want his name used. In the mid-'90s, for instance, Baker introduced Rubenstein to members of the royal family in Saudi Arabia and Kuwait; since he left Parliament last year, Major has been opening doors to big money in Europe and Canada. The allure of a former President is particularly irresistible. At Carlyle's annual investor meetings, CEOs and money managers line up to have their pictures taken with Bush.
For his camera mugging and speech giving, Bush is paid "in line with market rates,'' says Rubenstein. That would mean about $100,000 per speech, so if Bush makes five or six speeches a year, as Rubenstein claims, then the former President is earning at least $500,000 annually from Carlyle, not including the money he makes investing in deals. Rubenstein declines to specify which companies Bush has put money into, except to say that as a rule, they have nothing to do with the U.S. government.
There's no doubt that without these stars Carlyle would not have been able to raise as much money as it has. The firm's impressive returns and Rubenstein's seemingly inexhaustible energy and willingness to spend 300 days a year traveling have certainly played a role, but it's the bigwigs who draw crowds and really leave an impression. Their names on Carlyle brochures and their faces at Carlyle events give the firm a patina of power and credibility. "David's a brilliant fundraiser," says a source formerly associated with Carlyle. "What he's done so masterfully is traffic on the impression that the connections they have from these guys can bring them many valuable deals."
In the case of Carlucci, that impression happens to be true. The deals he's brought in total close to $2 billion in profits. There were Magnavox and GDE, makers of top-secret electronics gear, and Vought, an aircraft-parts manufacturer, all of which Carlyle bought and sold within two years, netting $300 million, $109 million, and $140 million, respectively.
Carlyle today is mostly associated with the defense industry, and one of the things Rubenstein and his partners would like to get across is that they invest in other things too. In fact, the firm owns stakes in everything from European automotive-parts manufacturers to Silicon Valley startups and Japanese DSL companies; roughly 25% of its profits last year came from real estate. But if you follow the money, it leads straight back to defense, which is where the greatest chunk of Carlyle's profits have come from. Today defense accounts for about 10% of the firm's total investments, but in the early days it was 60%.
The firm's biggest score to date also involved a military contractor--United Defense, which went public in November, turning Carlyle's $130 million investment into $900 million. But the story of United Defense's latest coup also shows why Carlyle will probably never be seen as just another shrewd investment firm.
Last spring, when United Defense was feverishly pitching the Crusader, one of its new products, to the Department of Defense, Jacques Gansler, then in charge of acquisitions at the Pentagon, got a call from across the Potomac. It was Frank Carlucci, and according to Gansler, he wanted to know how Gansler felt about the Crusader, a controversial self-propelled artillery system that many inside the Pentagon felt was out of sync with plans for a lighter, more mobile Army. "I think he [Carlucci] wanted to make sure I was personally involved and that it wasn't going to be one of these things that got pushed down the bowels of the system,'' says Gansler, who has known Carlucci since the Reagan Administration and occasionally sees him at D.C. social events. As it turned out, Gansler was no fan of the Crusader and told Carlucci as much, ending that conversation. But Gansler thinks that had he been a fan, Carlucci "definitely would have wanted to make sure I was involved.'' It wasn't the first time Carlucci had had a conversation with a member of the Pentagon brass on behalf of a Carlyle company. In the early '90s, when Carlyle owned GDE, Carlucci drove over to Bethesda, Md., and met with, among others, Major General Raymund O'Mara, who was head of the Defense Department's Defense Mapping Agency, then a big GDE customer.
Carlucci acknowledges both conversations but asserts that neither constitutes lobbying. In O'Mara's case, he points out that GDE already had business from the mapping agency; in the case of Gansler, Carlucci says his call did nothing to advance the Crusader's cause. Nor, he says, did any of his interactions with Secretary of Defense Donald Rumsfeld during that time. The two men have known each other since their days on Princeton's wrestling team. The Rumsfelds have been to the Carluccis' for dinner and on several occasions have offered their ski house in Taos, N.M., to Carlucci and his wife, Marsha. It certainly would be easy for Carlucci to strike up a conversation over cocktails about the Crusader or some other Carlyle-related matter, but Carlucci says he never does that. "In light of our friendship, I'm particularly cautious about not discussing Carlyle business with him. In fact, I have never mentioned the word 'Crusader' in his presence," he says. All this may well be true. Yet it certainly can't hurt if it's known throughout the Pentagon that you are good friends with the Secretary of Defense. The Crusader, incidentally, is on the 2003 defense budget, making it likely that the Pentagon will ultimately buy 480 of the artillery systems for $5 billion.
There's no question that Carlyle does occasionally make calls to the government on behalf of its companies. They may not be hard-sell lobbying calls, but making introductions to influential people is often just as effective. One company Carlyle funded recently through its venture fund hopes to tap into the firm's government connections. Indigo Systems, a maker of infrared-camera technology in Santa Barbara, has an interest in seeing the laws restricting exports of U.S.-made infrared technology lifted or amended. Indigo's technology goes into tiny cameras that manufacturers are starting to place in cars. These cameras "see'' objects out of the range of the headlights and display them on a digital monitor. "The automotive industry is not centered on the U.S. today, and if our product is going to become a standard item on cars, I've got to have access to a global marketplace,'' says CEO Tim Fitzgibbons. During the five months it took Indigo and Carlyle to put together a deal, the two sides talked about ways Carlyle could help open doors within the government. "If somebody at Carlyle says to whoever is chairing a committee, 'We wish you would listen to these guys, we're invested in them, and they've got a good point,' then that says a lot. As opposed to me landing in D.C. and trying to get appointments, which is damn near impossible,'' says Fitzgibbons. Indigo's camera technology also has lots of security applications, and the company would like to get a slice of next year's $38 billion federal budget allocated for homeland security. "Carlyle certainly can't influence the outcome, but they can at least get us an audience,'' says Fitzgibbons.
Besides opening doors, fundraising, and marketing, there is another advantage to getting ex-government honchos to join your firm, and that's investment insight. Carlucci didn't help companies like Magnavox, GDE, and Vought win any defense business, but he brought these firms to Carlyle because of connections he'd made with defense contractors while at the Pentagon. And as a former Defense Secretary just a few years out of the job, he knew how to evaluate the companies. It was the end of the Cold War and Pentagon budgets were way down, but Carlucci knew big money was still going to be spent on certain programs. He figured that highly classified electronic equipment--such as the boxes for analyzing radar imagery and the battlefield radios made by Magnavox, as well as the digital mapping technology for cruise missiles made by GDE--was going to be very valuable as the Pentagon tried to make the Armed Forces smarter. Later, when Carlyle invested in Elgar Electronics in 1996, Carlucci looked favorably on something that scared off other investors. Says Elgar CEO Ken Kilpatrick: "Other people questioned what would happen if our business of selling automatic testing equipment to the Navy would go away. But Carlyle understood that the Navy was committed to this program and that it was just in the middle of it." Carlyle sold Elgar in 1998 for a profit of $100 million.
Carlucci downplays the extent of his insight by saying that top analysts like Loren Thompson at the Lexington Institute know just as much as he does about defense spending, and maybe more. Certainly people like Thompson are quite knowledgeable and have networks of contacts at the Pentagon, but they don't belong to the same high-level coterie that a former Secretary of Defense does. They don't, for instance, go to lunches like the one Rumsfeld gave a little over a year ago where former Pentagon heavyweights like Carlucci, William Cohen, Caspar Weinberger, William Perry, and Dick Cheney all chatted and mingled. "Cabinet-level people are a small fraternity who all stay in touch,'' says a former Carlyle staffer. "Once they've reached that global 50,000-foot view, they tend to stay there.''
Though defense has been Carlyle's most fruitful area to date, Carlucci and the firm's current head of defense investing, Alan Holt, don't have plans to do many deals this year. Wars are such an obvious bonanza for defense contractors that prices get bid up, and Carlyle thinks they're too high now. Fortunately, there are lots of other opportunities on the horizon. Carlyle recently launched its first energy fund in partnership with Riverstone Holdings; it is also in the process of putting together an asset-management group, headed by the former treasurer of the World Bank, that will invest in other private-equity funds. With the help of former SEC chief Levitt, Rubenstein is setting up a financial services fund. There's also telecom, which has the biggest team of people devoted to it of any area at Carlyle. "There are dramatic restructurings in the telecom and media business going on right now, and the one thing they have in common is that they're all driven at some point by government action,'' says former FCC boss Kennard--who, like Levitt, is a Democrat, which shows that Carlyle can be bipartisan.
Rubenstein started recruiting Kennard to be a managing director in Carlyle's telecom group as soon as he left the commission last year, and ultimately won out over lots of other bidders. He was quite a catch. Kennard knows everyone who's anyone in telecom and has extensive contacts at regulatory agencies around the world. Could telecom be Carlyle's new defense? Rubenstein doesn't like to put in it those terms, but he's hoping for big returns. Looking at what Carlyle and its star-studded team have been able to do in the past, would you bet against him?
July 18, 2010
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