The Carlyle Group IPO of Publicly Traded Private Equity FirmThe Carlyle Group IPO of Publicly Traded Private Equity Firm Harvard Case Solution & Analysis

The Carlyle Group IPO of Publicly Traded Private Equity Firm Case Study Solution


Carlyle Group is a private equity firm that was formed by D’ Aniello, William, and Rubenstein in 1987 with an initial investment of $5 million. The group has become one of the leading private equity firms in US with investments in well-known companies operating around the world. The firm had 89 funds, and 63 fund-of-fund vehicles across four segments. The first segment was Corporate Private Equity (CPE) which was the oldest and largest investment segment for the company because it represented about 60% of the investments.

Second segment of the firm was Real Estate investment and this segment accounted for 20% of company’s overall investment. Third division was GlobalMarket Strategies (GMS) which is 18% of the total investment. The company has huge potential to grow into the market because the company’s assets under management (AUM) had grown with a cumulative average growth rate (CAGR) of 32% which was one of the highest in the market.

This growth was due to the major acquisitions of the firm during the period of 2003-11 other than the Corporate Private Equity segment, and Real Estate segment. The firm had well diversified the investment throughout the six continents. Unlike, other private equity firms, it was the only one that diversified its investment and acquired funds throughout the world since its inception.For the past 10 years, thecompany is ranked third in fundraising.

It has 62 professional investor relations, and it has professionals that managed, and communicated the investors on a regular basis to sustain their confidence by providing regular updates by various means of communication. But, it was a concern for the company that why company was preparing for the public IPO, given that except few publicly traded equity firms, all are traded below their initial bidding price.

Carlyle’s good investor relations from west to east consist of many professional contacts that could provide huge capital for the investment proposals. So, it would be profitable to go public being a private equity firm.



Question 1

Trend of the PPE’s to go public

The trend of going public for the private equity firms has many reasons. As the founders have been looking for liquefying their holdings, and that the fundraising in themarket has become very complicated as it is very dynamic, competitive, and a time consuming task. As many private equity firms looking for fundraising the management fees come under pressure.

So, the private equity firms going public are looking for a permanent source of capital on which firm they could rely rather than making efforts individually on many investors in the market.The private equity firms have also been using the IPO proceeds, or the stocks as the acquisition currency in the market.

Many examples can be pointed out such as KKR used its stock in 2010 to merge with a publicly traded buyout fund that it had been managing before.However, if the private equity firms can go public then their management would just focus on generating fees, quarterly earnings, and the daily stock of the company.

So, going public wasvery simple as many private were willing to go public because if the company goes public than it would sell the non-controlling shares and obtain cheap capital very easily or going public also means to cash out the partners. Consequently, investors in the market could invest into private equity and private equity would have a permanent source of income.

The major reason behind going public was to access to capital markets flexibility and low costs capital. Because, the capital markets are relatively provide higher return to the shareholders than any other investment. On the other hand, the fundraising has become one of complicated process into the market, since company has good standing in raising funds, but it has not permanent source of capital.

The second major reason for the private equity firms to public is to bring efficiency into the management, and allow management, officials to focus on the services rather than on fundraising. So, the focus of management would be diverted to operations that would add value to firm’s services, and it would enable firm to generate more services revenues from operations.

Therefore, the trend of going public has increased into the market for private equity firms. Because, they have flexibility in fundraising at lowest possible costs, and no interference by any investors, but it would be regulated by the securities commission. Thus, this trend into the market is very famous among the private equity firms.

Question 2

Issues PPE Firms raise for the shareholders

The Carlyle Group was priced conservatively due to the economic conditions in the market. The market had not recovered fully from the recent financial crisis. So, the offer price for Carlyle was $23 to $25 since company could have a better initial price but given the conditions of the market it could not achieve the better price. Previously private equity firms who had gone public had good initial price....................

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