Carlyle Promotions Show Diversification as Firm Prepares IPO

Carlyle Group, the world’s second- largest private-equity firm, said less than a quarter of the employees it promoted to senior positions were in its buyout unit as the firm is expanding other businesses in preparation for an initial public offering.

Carlyle promoted 41 people to managing director or director in London, Mumbai, Sydney and other offices around the world, the Washington-based firm said in a statement today. Ten of those promotions were in its buyout business while the remainder were in units such as real estate and mezzanine funds, as well as support groups such as investor relations.

Firms such as Carlyle and Blackstone Group LP (BX) are expanding beyond leveraged buyouts into businesses that produce steadier earnings as the pace of buyouts has slowed and debt to finance transactions has remained scarce. Carlyle is preparing what may be the largest initial public offering by a private-equity manager since Blackstone raised $4.75 billion in 2007.

Private-equity firms pool investor capital to buy companies, financing their transactions with debt, with the intention of later selling the companies or taking them public for a profit. Many buyout firms raise mezzanine debt funds to help finance takeovers when banks scale back on lending. Some private-equity firms also take stakes in companies in exchange for capital to help them grow, or provide venture capital financing to startups.

Loan Acquisitions

In November, Carlyle bought New York-based Churchill Financial LLC to increase its lending business and earlier acquired $500 million of collateralized loan obligations from Wells Fargo & Co.’s Foothill Group Inc. unit. Carlyle previously bought CLOs overseen by Mizuho Alternative Investments LLC’s U.S. loan management business Mountain Capital Advisors and purchased loans and other credits from Stanfield Capital Partners LLC, according to data compiled by Bloomberg.

Blackstone, the largest private-equity firm, has reduced its reliance on private equity by expanding its real-estate unit to $30 billion of fee-earning assets and its credit business, which invests in loans and other debt, to $28.7 billion as of Sept. 30. Stephen Schwarzman, Blackstone’s chief executive officer, has said the firm’s hedge fund-of-funds unit, which has farmed out $37.2 billion to other private-equity firms on behalf of clients, is the largest in the industry.

Rising Profits

Carlyle’s diversification also extends geographically. The firm operated 86 funds as of June 30 across Africa, Asia, Australia, Europe, the Middle East and the Americas. It plans to step up investments in Europe and sub-Saharan Africa, managing director David Marchick said last month in a television interview with CNBC.

Carlyle’s net income for the first nine months of 2011 rose to $918.1 million from $571.1 million a year earlier, and revenue rose 60 percent to $2.01 billion. Carlyle returned $15 billion to its limited partners during the same period, the most it has ever distributed over nine months, an investor said at the time.

Its founders -- William Conway, Daniel D’Aniello and David Rubenstein -- received a combined $413 million last year, according to a regulatory filing this month. Carlyle said it doesn’t plan to have a compensation committee, leaving decisions regarding pay to the founders.

Carlyle plans to list its shares on the Nasdaq under the symbol CG. It hasn’t set a price range or the number of shares it aims to sell. The firm follows rivals Blackstone and KKR & Co. in seeking to go public.

Carlyle, which oversaw $148 billion as of Sept. 30 and employs about 1,200 people, expects to hire more employees after its IPO, it said in the regulatory filing.

To contact the reporter on this story: Devin Banerjee in New York at dbanerjee2@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net