Carlyle acquires top industrialist

by Austin English Sunday Business Post (www.sbpost.ie), Dublin, Ireland, 1 December, 2002

 

Departing IBM chairman Louis Gerstner Jr is to take over the reins from Frank Carlucci in January as chairman of the Washington private equity firm Carlyle Group.

Carlyle has been described as "a stud farm for statesmen, siring fortunes merely through political connections". George Bush Sr, former US president and father of the current US president, is an adviser to Carlyle, while former British prime minister John Major heads the group's European branch.

Former US secretary of defence, Carlucci, who will become chairman emeritus, came on board in 1989, followed by former US secretary of state James Baker III, former Securities and Exchange Commission chairman Arthur Levitt Jr, former White House budget chief Richard Darman and former FCC chairman William Kennard.

Their presence on the board has earned Carlyle a reputation as a quasi-political institution, which today manages about $13.9 billion for private and well-connected investors.

Gerstner's appointment and his credentials could be used as a means of shedding that reputation.

The group was founded in 1987 by a former aide to the Carter administration, David Rubenstein, and William Conway Jr, former chief financial officer of MCI Communications.

It amassed multibillion-dollar fortunes by buying up ailing companies, turning them around and selling them off for a hefty profit a few years later. Defence and telecommunications proved worthy sectors for the practice, which has earned the firm a 36 per cent rate of return on its investments.

Today, Carlyle is the largest merchant bank in the United States, and rumours suggest that it could be getting ready to go public. That's where Gerstner comes in.

After nine years at the top at IBM, in which he steered the company through a turbulent period when personal computers threatened to make mainframes, and therefore IBM, irrelevant, Gerstner has come out on top. His experience and connections are exactly what Carlyle is looking for.

Gerstner has access to the big Fortune 100 companies, which is good news for Carlyle if it is in the mood for a shopping spree. There is also an abundance of spare cash to invest if it wants to go public.

One of the most secretive, but well-connected, companies in the world has bagged one of the world's biggest industrial celebrities to lead it into a reorganised and possibly public future.

Copyright © 2002 Sunday Business Post
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