Carlyle CEO resigns after deal negotiations fail

Private equity giant Carlyle Group is replacing its chief executive Kewsong Lee, who will leave the New York and Washington-based group just two years after his July 2020 appointment.

Lee’s exit, announced Sunday night, comes after Carlyle’s board of directors met and decided to end contract negotiations with Lee, according to a source with direct knowledge of the situation. Lee, who was named co-chief executive alongside Glenn Youngkin in 2017, was given a five-year contract that expired at the end of the year.

After informing Lee that it had decided not to renew his contract, Carlyle decided to resign immediately. William Conway, a co-founder of Carlyle, will be its interim head as it searches for a full-time replacement.

“With Kewsong Lee’s employment agreement approaching completion and the company entering its next phase of growth, he and our board agreed that now is the right time to initiate the search for a new CEO to lead the company forward,” Conway said in a memo sent to employees and made available to the Financial Times.

“[W]We must continue to execute on our business plan and build on the company’s strong performance across our three segments,” he added.

The decision surprised close supporters of Carlyle. “[T]This is a sudden and unwelcome surprise change, especially considering the positive strides we believe the company has made during this time [Lee’s] in terms of accelerating growth, entering new businesses and increasing profitability,” said Robert Lee, analyst at Keefe, Bruyette & Woods.

“We had only met with Lee last week [and] a group of investors, and he seemed comfortable in his position and optimistic about the company’s strategic direction,” he added.

Carlyle shares were down 5.4 percent through early afternoon trading in New York.

The sudden exit throws the leadership of the $376 billion group into yet another upheaval as it navigates a more difficult investment environment, with volatile markets and a drop in commitments from institutional investors.

It also marks another spontaneous shift in Carlyle’s succession planning beyond co-founders Conway, David Rubenstein and Daniel D’Aniello, who formed the group in 1987.

Unlike competitors like KKR, Carlyle is struggling to identify his next generation of leaders. Lee served as co-chief executive alongside Youngkin, a shared role intended to be similar to Conway and Rubenstein’s joint leadership during the company’s rise to a publicly traded industry giant.

However, Youngkin decided to retire in late 2020 due to friction with Lee, throwing Carlyle’s succession plan into turmoil. In 2021, Youngkin launched a successful candidacy to become governor of Virginia.

Lee took sole leadership of Carlyle as it recovered from the shock of the coronavirus pandemic, which had caused it to post steep losses as the performance of many of its mutual funds faltered.

Under Lee, Carlyle’s business revived as he planned the company’s expansion into credit and insurance-related investments under new leadership. He also set a goal of raising $130 billion in new money by 2024, with much of the fundraising focused outside of Carlyle’s traditional corporate buyout business.

In the second-quarter results released in late July, Carlyle had achieved more than half of Lee’s goal, which he insisted the company would achieve. However, fundraising in the buyout unit has slowed. In the second quarter, its new flagship fund raised just $2.2 billion.

At the same time, Carlyle was rapidly expanding elsewhere, forging a partnership with insurer Fortitude Re, which brought in $48 billion in assets last quarter.

In an interview with the Financial Times in late July, Lee emphasized Carlyle’s diversification from private equity buyouts, where the firm first made its name under Conway and Rubenstein.

“Most of our fee-based assets under management are now associated with global credit,” Lee said, brushing off funding challenges in Carlyle’s eighth flagship buyout fund as “old news.”

“It’s a very different company than it was a few years ago,” he said. “We have consciously diversified our business.”

Conway, who oversaw Carlyle’s private equity investments for decades, said he was “grateful” to Lee for his efforts to “position Carlyle for the future.”

Lee said he was “grateful for the opportunity to build the company with an incredibly talented and dedicated team.”

Comments are closed.