would guess that the hedge fund will allow them several things:
1. They can (if they are very careful) trade either +/- on their own buyout plans
2. Get more into trading so they can keep that part of the business more private (particularly in the pre-takeover phase)
3. Offer clients a place to put their money while they are waiting for the next mega LBO.
4. Test the water before they go after a company by buying smaller amounts…
5. Herding companies into position for a buyout.
Carlyle has 1000 investors and $50+ billion of equity to invest in leveraged buyouts, small private companies, big commercial real estate, etc. (the 3 remaining founders still own about 50% of the partnership) Carlyle’s owns, or has a chunk of, lots of companies including Dunkin' Donuts, Baskin-Robbins. Known for dabbling in defense companies which makes sense when you look at the ex-politicians running it. (political arbitrage?)
A hedge fund of a few billion of relatively unregulated trading dollars might come in handy for extra game playing in an LBO like: (using the target company's cash flow and cash to repay the debt ) Carlyle borrows $1 billion, puts $100 million of its own, buys 51% of ABC corp. which has little debt and $500 million in cash and $50 million a year in cash flow. Carlyle then pays itself back $200 million from the $500 mil (quick profit of 100 million) and uses the remaining cash and cash flow to pay the interest on the debt. A few management changes (and perhaps a little politicking to smooth the way given all the ex-Presidents etc. on the board) and, after a decent interval, the company is taken public, by selling, say, $600 million in common stock. (with some of the 600 staying in C.’s pockets.)
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would guess that the hedge fund will allow them several things:
1. They can (if they are very careful) trade either +/- on their own buyout plans
2. Get more into trading so they can keep that part of the business more private (particularly in the pre-takeover phase)
3. Offer clients a place to put their money while they are waiting for the next mega LBO.
4. Test the water before they go after a company by buying smaller amounts…
5. Herding companies into position for a buyout.
Carlyle has 1000 investors and $50+ billion of equity to invest in leveraged buyouts, small private companies, big commercial real estate, etc. (the 3 remaining founders still own about 50% of the partnership) Carlyle’s owns, or has a chunk of, lots of companies including Dunkin' Donuts, Baskin-Robbins. Known for dabbling in defense companies which makes sense when you look at the ex-politicians running it. (political arbitrage?)
A hedge fund of a few billion of relatively unregulated trading dollars might come in handy for extra game playing in an LBO like: (using the target company's cash flow and cash to repay the debt ) Carlyle borrows $1 billion, puts $100 million of its own, buys 51% of ABC corp. which has little debt and $500 million in cash and $50 million a year in cash flow. Carlyle then pays itself back $200 million from the $500 mil (quick profit of 100 million) and uses the remaining cash and cash flow to pay the interest on the debt. A few management changes (and perhaps a little politicking to smooth the way given all the ex-Presidents etc. on the board) and, after a decent interval, the company is taken public, by selling, say, $600 million in common stock. (with some of the 600 staying in C.’s pockets.)
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