Carlyle Said to Seek $2 Billion for Mid-Market LBO Fund

Carlyle Group LP, the world’s second-biggest manager of alternative investments such as private-equity holdings and real estate, is seeking $2 billion to invest in mid-sized U.S. companies.

The Washington-based firm is preparing marketing materials for Carlyle Equity Opportunity Fund II, said two people with knowledge of the plans, who requested anonymity because the information is private. The vehicle follows a $1.1 billion pool that completed fundraising in 2012 and sought investments of $25 million to $150 million in U.S. companies.

The largest private-equity firms, including Blackstone Group LP, KKR & Co. and Carlyle, have found investment opportunities in smaller companies as valuations for leveraged buyouts remain high. Mid-size companies in the U.S., with annual sales from $10 million to $1 billion, increased revenue by 7.5 percent in the third quarter, compared with 5.5 percent in the Standard & Poor’s 500 Index of larger companies, according to Columbus, Ohio-based National Center for the Middle Market.

Private-equity firms in the first half of the year did 83 percent of their deals with medium-sized companies, the highest proportion since at least 2005, according to Seattle-based PitchBook Data Inc. That compares with 70 percent in 2011 and 60 percent in 2009, according to PitchBook.

Cohen, Coburn

Carlyle’s first equity opportunity fund invested in companies including car repairer Service King Collision Repair Centers, student travel organization WorldStrides, tour operator Bonotel Exclusive Travel and commodities trading firm Traxys Group. The pool was producing a 26 percent annual return after fees and a 1.5 times multiple of invested capital as of Sept. 30, according to Carlyle’s third-quarter earnings statement.

The firm hired Rodney Cohen in 2010 from Pegasus Capital Advisors LP to oversee the equity opportunity team with Brooke Coburn, who joined Carlyle in 1996. The team includes former Och-Ziff Capital Management Group LLC executive David Stonehill and former Pegasus adviser Adam Glucksman.

Randy Whitestone, a Carlyle spokesman, declined to comment on plans for the new fund.

Carlyle, founded in 1987 by Bill Conway, Dan D’Aniello and David Rubenstein, manages $203 billion across 129 funds and 141 funds of funds, which invest in various funds. The firm is seeking $2.5 billion for a second energy mezzanine vehicle, two people familiar with the plans said last month, and is close to completing fundraising for its debut international energy fund at $2.5 billion.

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