Big private-equity player says game is set to restart

Carlyle's Rubenstein sees smaller deals with less leverage

BY RICK CAREW
Hong Kong


ONE OF THE private-equity world's leading figures says he sees the light at the end of the tunnel.

David Rubenstein, co-founder of Carlyle Group, expects the flow of private-equity deals to pick up in coming months as companies begin to adapt to life beyond the era of megabuyouts.

Early last year, privateequity firms struck deals that were as large as $45 billion, fueled by easy credit. Later in the year, as credit markets seized up, deal making ground to a halt and some of those buyouts collapsed.

Now, as credit markets show signs of thawing, Mr. Rubenstein says, private-equity firms will cast their nets wider and close more deals ranging in value from $2 billion to $4 billion and that require less debt. One example is Carlyle's recent purchase of a majority stake in the U.S. government-consulting business of Booz Allen Hamilton Inc. for $2.54 billion.

'We think that the bottom has been hit in terms of private-equityinvesting activity, and you're now beginning to see the upward swing," he said in a telephone interview from Beijing, where he was meeting with Chinese government officials and business leaders.

Global private-equity firms such as Washington-based Carlyle are looking to take advantage of lower valuations for public companies by targeting the wounded U.S. financial sector and doing more deals elsewhere. As banks begin to clear piles of unwanted debt from their books, they are showing a willingness to lend again, albeit under stricter terms.

"Now I think it's reasonable to believe you can do a buyout in the $2 billion-to-$4 billion range with less leverage than you would have had before," Mr. Rubenstein said.

In some ways, the shift is a return to value investing within the private-equity industry. "If the debt is not going to be as favorable, then the price needs to be more favorable if you're going to get the returns," Mr. Rubenstein said. He added that Carlyle's network of relationships in Washington can help Chinese companies looking to enter the U.S. market when U.S. officials are wary of Chinese investments in industries deemed related to national security.

Private-equity firms hope to lend investing and political savvy to Chinese companies on overseas deals. Last year, a $2.2 billion bid by Bain Capital Partners LLC of the U.S.-that included Huawei Technologies Co.-to buy 3Com Corp. collapsed after U.S. officials withheld approval, citing 3Com security software made for the U.S. Defense Department.