Carlyle’s CEO says he is on alert as recession looms June 3, 2022 |
Carlyle Group CEO Kewsong Lee wants everyone to know that he isn’t concerned—but he’s certainly on alert.
In his words, Carlyle has its “eyes wide open”—a phrase Lee repeated several times during a presentation yesterday at a Bernstein conference.
There are reasons for investors to be wary: Between still-high inflation, poorly-performing markets, rising interest rates, and Russia’s war against Ukraine, everyone is rather wary of an impending recession. And Carlyle, for one, holds a lot of debt: Carlyle is one of the largest CLO (collateralized loan obligation) managers in the industry. In fact, just earlier this year, it paid nearly $813 million for even more CLO contracts.
When asked about investor concern over CLO exposure, Lee emphasized that Carlyle’s default rates are half of the industry average (They’re between the 1-2% range for both senior secured notes and subordinated notes and preferred shares, according to Carlyle’s first-quarter earnings)
“We are constantly repositioning that portfolio—constantly moving in and moving out of positions, out of names. And so right now our stance is more defensive than not—I think appropriately so,” Lee said. “And as we look at this portfolio day-to-day, we don’t see anything which is giving us huge concern. That’s not to say we’re not eyes wide open. Of course we are. But as we sit here today, we’re not seeing any huge problems.”
In general, Lee said he doesn’t think private equity firms are over-leveraged as we roll into this downturn.
“The banks have been pretty disciplined,” he said. “It’s not like we’re receiving terms greater than six, seven times. If you think about the last big financial crisis we had… Lots of leverage was being put on these entities. But you’re not really seeing that right now.”
While the broader economy and the financial markets may be suffering, Lee says there is reason to be optimistic about opportunities in private equity. If you look at the 200+ companies in Carlyle’s portfolio, he said, they were growing and their margins were expanding in the first quarter. “There’s a lot more resilience out there,” he said.
And the volatility actually creates opportunities in the private credit and alternative businesses. Not to mention there are other markets that are opening up, such as in Japan.
Prolonged stagflation and recessions aren’t good for anyone, but at the end of the day, it has to do with the investments you’ve made and the improvements you can add to a business, according to Lee.
“We feel pretty good—with our eyes wide open—about navigating through what lies ahead,” he said.
Coinbase cuts back… Coinbase, the crypto exchange long backed by Andreessen Horowitz that recently became the first crypto company to make the Fortune 500 list, said yesterday that the company was rescinding “a number of accepted offers” for people who haven’t started working at the company yet (Let’s hope those people hadn’t already put in their two weeks). It’s also extending its hiring freeze. “We always knew crypto would be volatile, but that volatility alongside larger economic factors may test the company, and us personally, in new ways,” the company said in a public statement it published on its blog. In merely the first three days of June, 10 U.S.-based startups have cut staffers, according to tracking site Layoffs.fyi.
Until Monday,
Jessica Mathews
Twitter: @jessicakmathews
Email: jessica.mathews@fortune.com
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Jackson Fordyce curated the deals section of today’s newsletter.
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VENTURE DEALS
- Devo Technology, a Cambridge, Mass.-based logging and security analytics company, raised $100 million in Series F funding. Eurazeo led the round and was joined by investors including Insight Partners, Georgian, TCV, General Atlantic, Bessemer Venture Partners, and Kibo Ventures.
- Super, a Jakarta-based social commerce platform, raised $70 million in Series C funding. NEA led the round and was joined by investors including Insignia Ventures Partners, SoftBank Ventures Asia, DST Global Partners, Amasia, B Capital, TNB Aura, Bain Capital chairman Stephen Pagliuca, and other angels.
- Chainguard, a Kirkland, Wash.-based supply chain software security company, raised $50 million in Series A funding. Sequoia Capital led the round and was joined by investors including Amplify, Mantis VC, LiveOak Venture Partners, Banana Capital, K5/JPMC, and CISOs.
- Yummy, a San Francisco-based, on-demand delivery and transportation services provider in Latin America, raised $47 million in funding. Anthos Capital led the round and was joined by investors including JAM Fund, Soma Capital, WIND Ventures, Ethos Capital, and YC Continuity.
- Foxen, a Columbus, Ohio-based financial solutions provider for the real estate industry, raised $44 million in Series A funding. Summit Partners led the round and was joined by Level Equity.
- Laminar, a Tel Aviv-based public cloud data security provider, raised an additional $30 million in funding from Tiger Global Management and Salesforce Ventures.
- EnsoData, a Madison, Wis.-based sleep data healthcare company, raised $20 million in a Series A extension round. Inspire Medical Systems led the round and was joined by investors including Zetta Venture Partners, Venture Investors, Supermoon Capital, Colle Capital, HealthX Ventures, M25 Ventures, and other angels.
- Felux, a Cleveland-based online B2B steel marketplace and supply chain platform, raised $19.5 million in Series A funding. EquipmentShare led and was joined by investors including Signia Venture Partners, Suffolk Construction, Expa, Lightbank, 8VC, JumpStart Ventures, and others.
- Incognia, a Palo Alto-based mobile fraud detection platform, raised $15.5 million in Series A funding led by Point72 Ventures.
- LaunchNotes, a San Francisco-based product change communication software platform, raised $15 million in Series A funding. Insight Partners led the round and was joined by investors including Atlassian Ventures, The New Normal Fund, Essence VC, Cowboy Ventures, and Bull City Venture Partners.
- TRIPP, a Los Angeles-based VR wellness company, raised $11.2 million in a funding round. BITKRAFT Ventures led the round and was joined by investors including Qualcomm, Amazon Alexa Fund, HTC, Niantic, and Mayfield.
- Journera, Chicago-based travel technology platform, raised $10 million in Series B-1 funding. B Capital led the round and was joined by investors including Andreessen Horowitz, BCG, and PAR Capital.
- Sanlo, a San Francisco-based financial operating system and platform for gaming and app creators, raised $10 million in Series A funding. Konvoy led the round and was joined by investors including Initial Capital, Portage Ventures, XYZ Venture Capital, London Venture Partners, Index Ventures, Fin Capital, GFR Fund, and other angels.
- Kickoff, a New York-based wellness coaching platform, raised $7 million in seed funding. 645 Ventures led the round and was joined by investors including FJ Labs and Expa.
- Salient Predictions, a Boston-based weather prediction startup, raised $5.4 million in seed funding. Wireframe Ventures led and was joined by investors including Munich Re Ventures, Powerhouse Ventures, Endeavor8, First Star Ventures, and Blindspot Ventures.
- Culina Health, a Hoboken, N.J.-based personalized nutrition platform, raised $4.75 million in seed funding. Healthworx and Brooklyn Bridge Ventures co-led the round and were joined by investors including Rethink Impact, Tensility Ventures, Alpine Meridian Ventures, Knightsgate Ventures, Graham & Walker, Arkitekt Ventures, and Redo Ventures.
PRIVATE EQUITY
- Crestview Partners acquired a majority stake in OneMagnify, a Detroit-based digital marketing and analytics services company. Financial terms were not disclosed.
- Universal Pure, a Tilia Holdings portfolio company, acquired Hydrofresh HPP, a Defiance, Ohio.-based high-pressure processing and cold storage solutions provider to the food and beverage industry. Financial terms were not disclosed.
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EXITS
- Regeneron Pharmaceuticals agreed to acquire Libtayo, a Bridgewater, N.J.-based immune-oncology drug, from Sanofi for as much as $1.1 billion.
- ASGN Incorporated acquired GlideFast Consulting, a Waltham, Mass.-based IT consulting, implementation, and development company, from BV Investment Partners. Financial terms were not disclosed.
- CPS Solutions acquired Trellis Rx, an Atlanta-based pharmacy services provider for health systems, from Francisco Partners. Financial terms were not disclosed.
OTHER
- Cerberus Cyber Sentinel Corporation acquired Creatrix, a Colombia, Md. and Franklin, Tenn.-based cybersecurity and information technology company. Financial terms were not disclosed.
- Gupshup acquired OneDirect, a Bangalore-based customer service platform. Financial terms were not disclosed.
- StudioNow acquired Snapwire, a Santa Barbara, Calif.-based photo and video marketplace. Financial terms were not disclosed.
- Zayo Group Holdings acquired Education Networks of America, a Nashville-based network connectivity, communications, and cybersecurity services provider to K-12 school districts. Financial terms were not disclosed.
IPOS
- WM Motor Holdings, a Shanghai-based electric vehicle manufacturer, is considering raising about $1 billion in a Hong Kong initial public offering, according to Bloomberg.
PEOPLE
- Activant Capital, a Greenwich, Conn.-based growth equity firm, promoted David Yang, Maximilian Mayer, Shawn Jung, and Andrew Steele to partner. The company also promoted Sean Park to Chief People Officer.
- UP.Partners, a Santa Monica-based venture capital firm, hired Joshua Schachter as venture partner, Bob Riccomini as design partner, and promoted Ally Warson to partner.
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