The Wall Street Journal

Private-Equity Firms Notch Up Gains but Face Investing Challenges; Strong Debt and Stock Markets Have a Flip Side
By Ryan Dezember Feb. 20, 2014
In a year of record-setting profits, the big publicly traded U.S. private-equity firms were rewarded by investors with billions of dollars of new money for their next round of buyouts. Yet the same frothy debt and stock markets that have made it an ideal time for these firms to sell companies have made it increasingly difficult to buy new ones. "It was a challenging year to invest, particularly in the United States," Carlyle Group LP's co-founder and co-chief executive, William Conway, told investors Wednesday after the firm reported its fourthquarter and full-year earnings. "This was the flip side of robust public markets and low interest rates." The fourth quarter was Carlyle's most profitable as a public company, with earnings up sharply from a year earlier. Carlyle's economic net income, a measure of profits favored by buyout firms, was $576 million, or $1.64 a share, up from $182 million, or 47 cents a share, a year earlier. Analysts polled by FactSet forecast 96 cents a share. The Washington firm sold $6.3 billion in assets in the fourth quarter to fuel the gains. Those sales came predominantly from its corporate buyout funds, which shed big stakes in companies such as ratings firm Nielsen Holdings NV and Allison Transmission Holdings Inc. as well as entire companies. For the year, Carlyle reaped deal proceeds of $17.4 billion, not far from the $18.8 billion it collected in 2012. The $8.2 billion the firm invested in new deals during 2013 was also on par with the prior year, when it invested $8 billion. That, executives said, is a problem. "We really do need to step up the investment pace above the $8 billion," Mr. Conway said, adding that Carlyle, like its rivals, has been hampered by the