Carlyle has been an eager beaver in summer’s dog days. The buyout firm’s deals in August have included three worth more than $3bn, making it the global leader in the year to date both in terms of number of deals – 17 – and deal value – $15bn. Rivals Blackstone and Apollo have done $5.4bn and $7.9bn, respectively.
Carlyle on Thursday announced it would buy DuPont’s performance coating (read: car paint) business for $4.9bn in cash and the assumption of $250m in unfunded pension liabilities. The price tag equates to 12 times the unit’s trailing earnings before interest, tax, depreciation and amortisation. Carlyle will not assume certain overhead costs, which could push the multiple lower. DuPont stock fell slightly on the news.
The DuPont deal follows buyouts of Getty Images and Hamilton Sundstrand. Big transactions don’t take shape overnight, so the timing of these closings may be coincidental. But there are reasons Carlyle may be keen to get deals away sooner rather than later. Financing is cheap. Borrowing costs for leveraged companies have approached historic lows this summer. With a presidential election, and the so-called “fiscal cliff” looming, the credit outlook for the rest of the year is less certain. Consider also Carlyle’s most important deal of all – its May initial public offering, which raised $671m.
The company has been clear that the investors in its funds, rather than its new shareholders, are the top priority. And if the funds generate good returns, holders of the units it sold publicly will be long-term beneficiaries. But going public still adds another layer of pressure to generate fees reaped from the steady flow of new deals. Long-term returns on Carlyle’s 2012 shopping spree will be a crucial test of how well private equity and public markets mix.
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