Carlyle’s chief executive to resign after breakdown in contract talks

Private equity firm Carlyle Group is replacing its chief executive Kewsong Lee. Lee will quit his position in July 2020. New York and Washington-based group only two years after the appointment in July of 2020.

The departure throws the company’s management into a new era of turmoil in a difficult investment environment that is characterized by volatile markets and a decrease in the commitments of institutional investors.

Lee’s resignation, which was announced Sunday night, came after his negotiations over his contract with Carlyle have come to an impasse. Lee was named chief executive co-in 2017 with Glenn Youngkin, and was given an agreement for five years that ran out at the closing this year.

Instead of continuing negotiations, Carlyle said its board of directors had decided to not keep Lee’s current contract. After the board advised Lee of its decision, Lee took the decision to quit immediately.

“Both the board of directors as well as Mr Lee came to an agreement as part of their discussion that it is the right time to start a search process for the next CEO,” stated Carlyle in an announcement.

Lee’s sudden departure signifies yet another unplanned shift in the succession plan of Carlyle beyond the co-founders William Conway, David Rubenstein and Daniel D’Aniello, who created Carlyle in 1987.

Contrary to competitors like KKR, Carlyle has struggled to find the next generation of its leadership. Lee was a co-chief executive along with Youngkin in a split role which was intended to be akin to the leadership team by Conway and Rubenstein in the company’s rise to become a publicly traded company.

Then, Youngkin decided to retire in 2020, after tensions grew between him and Lee and Carlyle, putting the succession plan into chaos.

Lee assumed the sole leadership of Carlyle after the company recovered from the shock caused by the coronavirus epidemic, which had led the company to incur losses that were significant when its performance slowed in a number of the investment fund it managed.

Under the leadership of Lee Carlyle, the business grew as he planned the firm’s expansion into credit and insurance investments under new, hand-picked management. Lee also set a goal of raising $130bn of new capital by 2024. with the bulk of the funding directed away from Carlyle’s typical buyout business for corporate clients.

In the second quarter earnings report announced in late July, Carlyle was close to Lee’s goal which he emphasized the company would meet. However, the fundraising for the buyout division of the company has been slowing. In the second quarter of 2018, the new flagship fund of the firm raised only $2.2bn.

In the meantime, Carlyle was expanding rapidly in other areas and entered into a partnership with the insurer Fortitude Re that brought in $48 billion in new assets during the quarter.

In an interview conducted by the Financial Times in late July, Lee emphasised Carlyle’s diversification from private equity buyouts where the firm initially became known as a subsidiary of Conway as well as Rubenstein.

“The most significant portion of our fee-earning assets under our management is now linked to worldwide credit markets,” stated Lee, dismissing challenges to fundraising in Carlyle’s eighth fund for buyouts by calling them “old information.”

“It’s an entirely different business that it was just a few years ago,” he said. “We have deliberately diversified our operations.”

Cofounder Conway Cofounder Conway, who for many years managed Carlyle’s private equity investments is now Carlyle’s interim CEO while the company searches for an interim chief executive.

Conway stated that Conway said he was “grateful” and “grateful” to Lee who has worked hard in helping “position Carlyle for the future”.

Lee stated that Lee was “thankful for the chance to create the company with an extremely talented and dedicated team”.

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