In an attempt to diversify its business,
The Carlyle Group LP
) recently announced that it will acquire Diversified Global
Asset Management Corporation (DGAM). The acquisition is expected
to be complete by Feb 2014.
Carlyle will initially pay $33 million - $25 million in stock and
$8 million in cash - for DGAM and then an additional amount of
maximum $70 million might be paid over the following seven years,
subject to performance of DGAM. Management at DGAM will remain
Incepted in 2004, DGAM has roughly $6.7 billion in managed and
advised assets. On completion of the acquisition, it will be a
part of Carlyle's solutions platform, which includes funds of
private equity funds. As a result of this deal, Carlyle's
solutions platform will be able to offer diverse investment
solutions across hedge funds, private equity and real estate to
its clients. The latter had $48.4 billion in assets under
management as of Sep 30, 2013.
The deal with DGAM will mark Carlyle's first venture into funds
of hedge funds. However, the company already owns 55% stake in
three regular hedge funds: credit specialist Claren Road Asset
Management; emerging markets investor Emerging Sovereign Group;
and commodities expert Vermillion Asset Management.
Following the footsteps of asset manager
Blackstone Group LP
Kohlberg Kravis Roberts & Co. L.P.
), Carlyle has been diversifying its business over the past
decade to grow assets and reduce greater dependence on leveraged
buyouts. Carlyle recently acquired a 40% stake in Dutch
investment manager AlpInvest Partners NV and completed the
acquisition of Metropolitan Real Estate Equity Management LLC, a
fund-of-funds investor in property.
We believe that Carlyle's efforts to diversify beyond its
traditional business will help to boost earnings amid a volatile
operating environment. Also given its sound liquidity and balance
sheet position, we expect the company to drive further inorganic
growth in the quarters ahead.
Carlyle currently carries a Zacks Rank #3 (Hold). A better-ranked
stocks in the same sector include
Waddell & Reed Financial, Inc.
), which carries a Zacks Rank #1 (Strong Buy).
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