Carlyle names executives to succeed its co-founders

Carlyle’s move is rare in an industry where succession plans are not usually revealed © Reuters

Carlyle co-founders David Rubenstein and William Conway are to hand day-to-day running of the private equity company to a younger generation, becoming the first of the top-tier buyout groups to execute company succession.

The two 68-years-olds, who launched the Washington DC-based group with Daniel D’Aniello, 71, will relinquish their co-chief executive roles to Carlyle veteran Glenn Youngkin, 50, and Kewsong Lee, 52, deputy chief investment officer who joined from rival Warburg Pincus four years ago.

Although Mr Rubenstein and Mr Conway will become co-executive chairmen from January, Carlyle said the two new chief executives will have “full responsibility, authority and accountability for the firm’s performance”.

In making the changes, Carlyle is getting ahead of its main rivals — Leon Black’s Apollo, Steve Schwarzman’s Blackstone and Henry Kravis and George Roberts of KKR — in fully addressing its future leadership structure. Succession is a hot topic for the sovereign wealth funds, pensions and endowments that are the underlying investors for buyout groups.

Carlyle, which has $170bn of assets under management, was founded in 1987 and quickly came to epitomise a new breed of Washington rainmaker, recruiting executives from the senior ranks of the Reagan and Bush administrations who used their political connections to raise cash and broker deals in the defence sector and with foreign governments, including the UK.

Frank Carlucci, Ronald Reagan’s defence secretary, served as Carlyle’s chairman in the 1990s; President George HW Bush, British Prime Minister John Major, and James Baker, Mr Bush’s secretary of state, have all worked for the firm.

David Rubenstein, right, and Bill Conway, left, are set to give up their chief executive roles while Daniel D’Aniello, centre, will relinquish his chairmanship © Getty

The new appointees have been groomed for years by the founders and the succession planning has been in the works at Carlyle for months, according to people familiar with the plan.

The promotions follow a similar move by KKR, the US buyout group, which in the summer elevated two executives to leadership roles. While KKR positioned these roles as potentially succeeding the founders as chief executives, Carlyle’s move was more definitive.

“We have given them the titles of co-chief executives, which is not a change that been made elsewhere,” Mr Rubenstein told the Financial Times. “They will be in charge. They are younger and they will bring their own energy, creativity and perspective. You’ll see strategic changes in the firm.”

Stepping back: Carlyle founders

David Rubenstein

The Carlyle co-founder shaped the private equity industry in several fundamental ways, particularly in regards to his obsession with fundraising. Full profile

Bill Conway

© Bloomberg

The chief investment officer and co-founder has never sought the limelight, but he has been responsible for the high returns of the group’s flagship US funds. Full profile

Daniel D’Aniello

© Getty

In charge of running the day-to-day operations, the chairman may not be in the news as much as the other two founders but he has kept them together for the past three decades. Full profile

Mr Lee will focus on the company’s corporate private equity and global credit businesses, as well as corporate strategy and development, and capital markets.

Mr Youngkin, who led a Carlyle team that privatised the UK defence ministry’s secretive research arm in 2006, will oversee Carlyle’s real estate, energy and infrastructure businesses, the investment solutions segment as well as investor relations and external affairs.

Peter Clare, 52, who has worked at Carlyle since 1992, will become co-chief investment officer alongside Mr Conway. Mr D’Aniello, Carlyle chairman, assumes the role of chairman emeritus.

A former Jimmy Carter administration official, Mr Rubenstein was long seen as the firm’s fundraising specialist — Carlyle is notable in global private equity because of the spread of its activities both by geography and product category — while Mr Conway was the investment guru.

Among its wide range of holdings, Carlyle’s portfolio includes ownership of Addison Lee, the UK private-car hire company, and Nature’s Bounty, the American maker of vitamins and nutritional supplements, which until recently also included the Holland & Barrett, global health food chain.

The promotions were timed to coincide with Carlyle disposing of its poorly performing hedge fund businesses and after a group of company executives, including Mr Conway, were exonerated in a case linked to their decisions during the financial crisis.

Carlyle is set to emphasise that it has cleaned up its act and it is offering a clean sheet to the new co-CEOs, people familiar with the thinking behind the appointments said.

The promotions also come at a time when the company has performed well. Over the summer it posted better than expected results and it is reporting quarterly earnings in the next few days.

The move is likely to add extra pressure on their listed rivals in the US, as investors in private equity raise concerns over who is taking control of these fundraising houses. Fully 12 per cent of funds are set to close in less than a decade.

More recently private equity investors — which typically include pension funds and sovereign wealth funds — have been cutting back on under-performing managers, which has added to the pressure to set out clear succession plans.

This post originally appeared on Financial Times

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