The Carlyle Group
This case describes the investment philosophy, organizational structure, management processes and culture of the largest private equity firm in the world measured in terms of assets under management ($89 billion). The Carlyle Group is distinctive in several ways, including its origins in Washington, D.C. and its early commitment to organizing the firm and its investment decision-making process along industry lines. The latter enables the firm to build deep knowledge and capabilities in particular sectors which makes it possible for it to identify investment opportunities that will not be apparent to others, such as in industries where the fundamentals do not look promising. Carlyle is also very geographically diverse with 33 offices around the world, giving it a higher overhead structure than some of its peers. Through the "One Carlyle" approach which emphasizes collaboration, information sharing and knowledge transfer across sectors and geographical locations, the firm seeks to leverage the vast array of capabilities it has built over time. It is attempting to improve on this through the use of information technology. The case describes the firm's foray into financial services, an industry largely neglected by PE firms due to the inability to use leverage to improve returns, and professional services, another largely-neglected sector because the primary asset is human capital. The case also describes how the firm had to learn to develop a different approach to PE investing in Asia. Looking forward, the firm faces huge challenges in delivering attractive returns to its investors given its size and the size of the PE industry as a whole. These challenges are compounded by the financial crisis happening at the time of the case and the prospects of a potentially severe economic recession, raising questions about the future prospects of the PE industry and its role in the capital markets.