Now in Their Own Orbits, Carlyle's Stars Keep Rising
Tuesday, July 24, 2007
With $71.4 billion under management, Washington's Carlyle Group is easily the dean of private-equity firms in the region. But several alumni are beginning to attract notice in their own right.
More than a dozen former Carlyle employees have left to start their own investment firms or to push into other start-ups around Washington. The group includes Frederic V. Malek of Thayer Capital, which has billions of dollars under management; David W. Dupree's Halifax Group on Connecticut Avenue NW, partly owned by another big player in private equity, Texas Pacific Group founder David Bonderman; and Leslie L. Armitage, one of the youngest Carlyle partners ever at age 30 and the founder of Relativity Capital in Arlington.
"It's tough to walk away from the Carlyle name, the panache and the extremely bright people," said Rufus H. Rivers, who left the firm after four years to become a managing director at RLJ Equity Partners of Bethesda, a joint venture between Carlyle and Black Entertainment Television founder Robert L. Johnson. "But for some people, the entrepreneurial drive and the opportunity to build a firm from the ground up is too good to pass up."
Carlyle and its offspring have turned Washington into a thriving investment community that operates one notch below the nation's traditional money centers. While Carlyle's deals can run in the billions of dollars, its kin often focus their energies on transactions costing less than $1 billion.
"The Carlyle Group established D.C. as one of the East Coast's private-equity centers," said Peter M. Manos, a Carlyle alum now with Arlington Capital Partners. "They did it by playing to the strength of the D.C. market," focusing on government-related sectors such as aerospace, defense, telecommunications and information technology.
The Carlyle universe is extensive. At its center are alumni such as Esko I. Korhonen and Lacy I. Rice of Federal Capital Partners, a real estate equity firm; Mark Ein of Venturehouse Group in the District; and Jay Powell and J. Mitchell Reese of Severn Capital.
Orbiting those private-equity specialists are the legions of attorneys and accountants who have nested in Washington to serve the dealmakers. It is similar to the effect that mutual fund powerhouses T. Rowe Price and Legg Mason have had on Baltimore.
"You can't help but have the spill-out from a firm like Carlyle," Dupree said.
Global law firm Latham & Watkins has added many lawyers to its Washington practice to serve Carlyle and its offspring. Ernst & Young and Pricewaterhouse Coopers have both scaled up to serve the private-equity firms here. The effect is even felt at places such as BMW of Arlington, a favored car dealership for the Carlyle crowd.
"The legal and accounting professional services firms have had to expand to fill the needs of private equity here," said James R. Hanna, a private-equity lawyer for Latham & Watkins who is based in the District.
Veterans and alumni have become rich as well, many with their fortunes still locked up in Carlyle funds. Those funds have returned a net annual average of 26 percent to their investors over the past 20 years.
"Outside of my house, most of my net worth is still in Carlyle funds, and I am glad it is," said Nigel Jones of TWJ Capital in Bethesda. "Those are very smart guys."