The Carlyle Group: IPO of a Publicly Traded Private Equity Firm

27 Pages Posted: 30 May 2017

See all articles by Susan Chaplinsky

Susan Chaplinsky

University of Virginia - Darden School of Business

Felicia C. Marston

University of Virginia - McIntire School of Commerce

Abstract

This case is used in Darden's course elective, Corporate Financing, and is accompanied by a teaching note for instructors and Excel spreadsheet for students. The Carlyle Group IPO case explores the circumstances leading up to the firm's IPO in May 2012. Over the past 25 years, Carlyle had grown from a fledgling private equity firm to one of the world's largest and most diversified investment firms. Carlyle had prepared extensively for the roadshow; management anticipated some tough questions. Students are asked to evaluate the extent to which Carlyle is undervalued relative to its peers. The case provides information on how to evaluate the earnings received by the public shareholders and outlines several alternative approaches to value PPEs.

Excerpt

UVA-F-1689

Rev. Oct. 21, 2013

THE CARLYLE GROUP: IPO OF A PUBLICLY TRADED PRIVATE EQUITY FIRM

In April 2012, Daniel D'Aniello, William Conway, and David Rubenstein, the three cofounders of the Carlyle Group, embarked on a roadshow to explain the merits of their firm's initial public offering (IPO) to investors. Over the preceding 25 years, the firm had grown from a fledgling private equity (PE) firm to one of the world's largest and most diversified investment firms. Since September 2011, when it filed for the IPO, the threesome and other senior officers had prepared extensively for the roadshow; they anticipated some tough questions. Five PE firms had gone public since 2007: Fortress Investment Group, Blackstone Group, Kohlberg Kravis Roberts & Company (KKR), Apollo Global Management, and, most recently, Oaktree Capital Management. Only KKR was now trading above its IPO offer price. To a certain extent, the poor performance reflected the effects of the global financial crisis of 2007, which had hurt profits in the underlying funds. Although the capital markets had recovered from the lows of March 2009, conditions remained uncertain in the wake of a U.S. credit downgrade in the summer of 2011 and financial turmoil in the euro zone. Despite the much-anticipated pending Facebook IPO, since October 2011, 41 companies had delayed or withdrawn their IPOs.

. . .

Keywords: valuation, private equity, DCF, discounted cash flow, initial public offering

Suggested Citation

Chaplinsky, Susan J. and Marston, Felicia C., The Carlyle Group: IPO of a Publicly Traded Private Equity Firm. Darden Case No. UVA-F-1689, Available at SSRN: https://ssrn.com/abstract=2974503 or http://dx.doi.org/10.2139/ssrn.2974503

Susan J. Chaplinsky (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4810 (Phone)
434-243-7676 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/chaplinsky.htm

Felicia C. Marston

University of Virginia - McIntire School of Commerce ( email )

P.O. Box 400173
Charlottesville, VA 22904-4173
United States
804-924-1417 (Phone)

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