TCW will become a Carlyle portfolio company in Carlyle Global Financial Services Partners, a $1.1 billion financial services fund, and Carlyle Partners V, a $13.7 billion U.S. buyout fund, according to the announcement.
The Los Angeles-based TCW Group, originally known as the Trust Company of the West, was founded in 1971 and is a diversified asset-management firm with about $130 billion under management.
Financial terms were not publicly disclosed, but Carlyle’s funds and TCW management and employees are believed to have paid about $700 million in cash, and some debt, according to people familiar with the transaction.
P. Olivier Sarkozy, head of Carlyle’s Global Financial Services group, said he likes TCW for several reasons, including his belief that it is a better fit with Carlyle than with a large bank such as Paris-based Societe Generale.
“The management team is now incentivized to think like an owner, as opposed to thinking like a subsidiary of an owner that is 6,000 miles away,” Sarkozy said. “We’re taking them out from that situation, and also saying, ‘I can compensate you based on performance.’ We can incentivize management behavior more easily than a large, regulated business like a bank.”
Sarkozy also sees opportunities to create more value from professional money management, especially in an environment where it becomes more difficult to generate above-market returns.
“This is a real brand with a very competitive product suite, and there are marketplaces where we would expect to expand the business,” he said. “The asset growth of this company has been pretty good because you have good products with good underlying performance track records.”
The TCW acquisition is the latest in a flurry of deals by Carlyle. Last month, the private equity firm bought Hamilton Sundstrand’s industrial pumps business from parent United Technologies for $3.46 billion. Two days before that, Carlyle partnered with Genesee & Wyoming in a $1.4 billion acquisition of RailAmerica.
On July 2, Carlyle bought Sunoco’s more than 100-year-old refinery in Philadelphia, which preserved nearly 1,000 jobs.
TCW and its former star investor, Jeffrey E. Gundlach, whom Barron’s has called “The King of Bonds,” were engaged in one of the nastier legal disputes to hit the mutual fund world before the sides settled in December. Terms of that settlement were not disclosed.
The TCW deal is expected to close in early 2013. Carlyle shares closed Thursday at $24.02, down 1.31 percent. The stock is up about 9 percent since it went public three months ago.