October 14, 2016
Interviewed by: Privcap
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Carlyle’s Mid-Market Team: We Have a Mega Advantage

How does Carlyle’s middlemarket investment business benefit from its ties to the megadeal teams within the firm? Rodney Cohen discusses his multisector approach, how he looks for value opportunities, and what keeps him up at night. 

How does Carlyle’s middlemarket investment business benefit from its ties to the megadeal teams within the firm? Rodney Cohen discusses his multisector approach, how he looks for value opportunities, and what keeps him up at night. 

Carlyle’s Mid-Market Team: We Have a Mega Advantage
With Rodney Cohen of The Carlyle Group

Don Lipari, RSM US LLP: I’m with Rodney Cohen, Managing Director at the Carlyle Group, and Co-Head of their middle market platform. How are you, Rodney?

Rodney Cohen, The Carlyle Group: Doing well, thank you.

Lipari: How do you, as Rodney Cohen, make investment decisions covering such a broad spectrum of industries – candles, axles, pharmaceuticals. The deals that you’ve done in the two funds that you’re responsible for are all across the board. How do you make those decisions?

Cohen: Carlyle has vertical expertise in a number of spaces. Our big buyout fund is split up into aerospace and defense, consumer, healthcare, media and technology, industrials. So in those verticals, we have enormous expertise. These are teams of 12, 14 people that are dedicated specifically to that area, have been doing it for a very, very long time and have great, great results from it.

So we tap into those areas. I would say 60%, 70% of our transactions in one way, shape or form, touch that.

Lipari: A seller. Give me the talk track on how you get them comfortable taking a middle market business and joining the likes of Carlyle. It can be a little overwhelming.

Cohen: Explaining to people that we are dedicated solely to this area is an eye opener. I do believe people come in – and they don’t know whether we’re investing out of one fund, four funds. They just don’t know, many of them. So explaining to them that this is our bread and butter, this is all we do. I’m not involved in the mega buyouts. This is really where we live, and this is the team and we’re not wandering into different areas.

Lipari: So you’re in investing mode.

Cohen: We are.

Lipari: What’s a day in the life of Rodney Cohen when he’s in investing mode?

Cohen: Well investing mode is interesting, often reflective of the times obviously. And so there are periods where you’re incredibly busy and then there are periods that are somewhat more challenging. We tend to find, in our sizes, there’s always something to do. But it’s all about processing. It’s all about opportunity identification. And good or bad, like it or not, a tremendous amount of this business is still face to face. You got to get in a room with people and hear their story and listen to what they’re saying.

Unfortunately, it’s a lot of frog kissing. So it’s all about volume of meetings, volume of opportunities. I always say to people, I don’t really think of myself as working or not working. I could be at a cocktail party on a Saturday night in the middle of – pick a place – and someone comes up to me and says, “I have a business that I…” And I don’t care what I’m doing, my ears totally perk up.

That’s what keeps it interesting – people’s passion, the stories of people that come from nothing and build these incredible businesses up. And that’s why at that party, I don’t mind stopping and doing it because it is exciting and fun.

Lipari: It beats the Clinton Trump conversation anyways. Let’s…

Cohen: Yes it does.

Lipari: If you had to pick one sector, one industry sector, that if you said you only had to have one – it’s vanilla, chocolate, strawberry – which one will it be?

Cohen: That’s very hard. It has always been hard for me, personally, to step up and understand paying 13, 14, 15 times EBIDTA or multiples of revenues, for a consumer-driven brand. I’ve gotten there a little bit more on some of the software businesses, and understand. Part of being a generalist, I think, is looking for the best risk-adjusted return that you can find for your investors. And if you’re wed to a specific industry, it’s very hard to do that.

I think the beauty of private equity, you’re trying to create a vintage, right? So you’re trying to invest over multiple years. You’re trying to capture, not this moment in 2016, but that moment in ’16, ’17, ’18, ’19. And I think it’s prudent to try to stretch these things into that investment period so that you get a look at whether or not… And if the market does change at some point.

Lipari: What causes you restless night?

Cohen: I have a lot of restless nights because I am a light sleeper and these things are always rattling around in my brain. I would say that I probably spend an enormous amount of time thinking, “Have we dropped the ball on something? Are we missing something? Did we not follow up on something? Is something within our power to create incremental value that no one’s looking at?” And that’s tough thing, because that involves getting very, very micro on every company.

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