Carlyle Plans To Cut Staff By 10 Percent As Deals Slow

The Carlyle Group said yesterday it will lay off 10 percent of its staff as a worsening economy hinders dealmaking by the District-based private-equity giant.

Carlyle, which has about 1,000 full-time employees in 33 offices in 21 countries, said most of the layoffs will come from its U.S. offices. It did not say how many Washington-area employees will lose their jobs.

Most of the approximately 100 affected employees work in support and administrative positions, including accounting and personnel, although some dealmakers will be laid off. The employees were informed Tuesday and will be given severance packages, Carlyle spokesman Chris Ullman said.

"We did a thorough examination of every aspect of the firm, and we are adjusting the firm's cost structure to the current investment climate," he said. "We are still going to be the largest firm out there in terms of products offered. These are modest, targeted cuts to position the firm."

The private-equity firm has $91.5 billion under management and $40 billion in money committed from investors that has yet to be put to work. It recently raised $14 billion for another U.S. buyout fund.

Carlyle has generated annual returns of more than 26 percent for its investors over the past two decades. That performance has made its three co-founders billionaires and many of its employees wealthy.

Like many private-equity firms, Carlyle has seen the volume of its business deals slow to a crawl. As a result, there is not enough work for some employees. Ullman said the firm could not justify keeping the same level of staffing, Ullman said.

"These are tough times," Ullman said. "We are reverting to the size we were as of 2007 staffing. We need to balance our cost structure, which is people and expenses, with the volume of business."

Layoffs are also expected at other big private-equity firms.

American Capital of Bethesda, which provides financing to midsize companies, announced Tuesday that it would cut its workforce in Europe and the United States by 19 percent, laying off 110 people. The company's dealmaking abilities have been hampered by the freeze-up in credit markets, and it has posted four consecutive quarterly losses.

Troy L. Ward, an analyst with Stifel Nicolaus in St. Louis who follows the company, said the cuts were not surprising given the financial turmoil. "If you are not doing these deals, you are paying a lot of people to not do their jobs," Ward said.

Last month, Carlyle closed its Warsaw office and ended financial operations in some Eastern European and Asian markets, which resulted in the layoffs of 18 employees.

Despite the slowdown, Carlyle has pulled off a few deals this year. It bought the government operations unit of Booz Allen Hamilton for $2.54 billion last summer and it recently sold an automotive company AxleTech International to General Dynamics.

The slowdown has created some bumps for Carlyle as well. On Monday, one of its investments, Hawaiian Telcom Communications, filed for bankruptcy protection. In March, Carlyle wrote off a $700 million investment in its Carlyle Capital affiliate, and in July it said it would liquidate Carlyle-Blue Wave Partners Management, a vehicle that invested heavily in mortgage-related securities.

Staff writer Alejandro Lazo contributed to this report.