Tuesday, October 13, 2009

David Rubenstein: We Will Become Bigger Fat Cats

Speaking at Super Return Middle East, David Rubenstein co-founder of Carlyle Group said that the private equity industry will grow larger than before the financial crisis, as it transforms itself over the next two to three years.

Expect the leopard to move its spots around.

"Private equity will probably come up with a new name. It went from bootstrap deals in the early days to leveraged buyouts to management buyouts to private equity," he said. "Maybe it will go to change capital or value-added equity," he said.

Rubenstein said the industry will transform itself -- investments will be smaller and less frequent, equity levels put into deals will rise, debt will be more expensive than before and holding periods will rise. Ultimately, however, the industry will grow larger than before, he said.
The emphasis will be more on changing companies rather than leverage in the future, he said.


  1. If the name changes, I'll miss the PEU boys (private equity underwriters).

    Did Rubenstein talk about his business model, which includes governments providing R & D, worker training, huge chunks of revenue, liability protection, and even favorable market structures?

    Fat cats can only get fatter when they control the system. The PEU boys clearly do, as Uncle Sam kisses up to the financial kingpins. From bank rescues to public infrastructure, health care to education, privates are seen as the solution.

    When the government is a huge general contractor, PEU's benefit multiple ways. Watch 'em line up for those indefinite quantity/indefinite delivery, cost plus contracts.

  2. This is purely speculation on my part but I tend to agree with PEU Report/State of the Division.

    Actually Robert's title reminds me of a short book titled: Dead Fish and Fat Cats: http://www.viacorp.com/dead-fish-and-fat-cats.html

    Its about the decline of the fishing industry off the pacific coast of Canada. As one rivers salmon run dropped from 100 million per year to 3 million per year, the government agency "responsible" for managing this public asset more than doubled in size. They were the fat cats in this story, as the salmon business got worse, their budgets grew bigger.

    Although not directly related to Rubenstein or Carlyle, there is a similar business model. Use the government to destroy your competition and rip off any public assets you can get your hands on.

    Hey, Elinor Ostrum where are you?