Advantage Carlyle in Private Equity Succession
Would you look at that? KKR & Co. really did spur a game of thrones in the realm of private equity. And there's likely more to come.
On Wednesday, a little more than three months after KKR unveiled its succession plans, smaller rival Carlyle Group LP did the same -- and even took it a step further. The Washington-based firm announced that founders David Rubenstein, Bill Conway and Dan D'Aniello are officially handing over the reins to its next generation of leaders, a decision that gives investors assurance about Carlyle's longevity and a welcome level of continuity.
The shuffle, effective Jan. 1, will see Glenn Youngkin and Kewsong Lee step into co-CEO roles, a rung above the co-president and co-COO roles that were bestowed on their KKR compatriots Scott Nuttall and Joe Bae. It means that Carlyle now has achieved the most progress among its peers in terms of succession. That very situation that could have been avoided if Henry Kravis and George Roberts, who are largely figureheads, had relinquished their co-chairman and co-CEO titles back in July and simultaneously made room on the board for their next generation.
Although Youngkin is essentially a Carlyle lifer, having worked there for 23 years, Lee's appointment should give hope to lateral hires across the private equity industry. He joined Carlyle in 2013 after more than two decades at Warburg Pincus LLC and has now proven that it's possible to ascend to the top even if you didn't cut your teeth at a particular firm. 1
With succession set at KKR and Carlyle, the spotlight turns to larger rival Blackstone Group LP, which wants to extend its size advantage by doubling assets under management to $800 billion over the next five years. 2
The New York firm's 70-year-old chairman, CEO and co-founder Stephen Schwarzman is still capable, but he has more than a decade on the average CEO of a member of the S&P 500. 3 He's by no means the oldest chief executive of a major U.S. company.
On a call with investors back in 2015, Schwarzman introduced newly promoted CFO Michael Chae, saying:
Part of the fun of Blackstone is that people grow and they get new responsibilities and when we know them and trust them and we think they're super smart, that's the way to grow a great firm.
Perhaps it's time for more "fun" at Blackstone.
David Rubenstein is the host of the Bloomberg television and digital series, “The David Rubenstein Show: Peer-to-Peer Conversations.” Peter Grauer, chairman of Bloomberg LP, the parent of Bloomberg News, is a non-executive director at Blackstone.
Carlyle's maneuvers also include the promotion of Pete Clare to co-CIO alongside Conway and the appointment of Youngkin, Lee and Clare to its board.
At its pace of fundraising for the past 12 months, Blackstone is on track to raise another $312 billion in the next 5 years which would leave it about $100 billion shy of its target. But additional fundraising for new strategies, or small acquisitions would keep it well within reach.
Notably, Blackstone isn't part of the S&P 500 because of its partnership structure but this would change if it converts to a corporation, a move that's basically contingent on tax reform.
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