Will Harvey Schwartz prime Carlyle for a sale?

One thing to start: Carlyle Group’s new chief executive Harvey Schwartz stands to make more than $180mn over the next five years, a package that would make him one of Wall Street’s highest-paid executives.

In today’s newsletter:

The Goldman veteran taking private equity for a spin

Five years ago, few on Wall Street would have bet on Harvey Schwartz becoming head of Carlyle Group. But a lot has changed since then.

Let us take you back to 2017, when two storied Wall Street firms began formalising succession plans from the leaders that had steered much of their growth on public stock markets.

Carlyle elevated two dealmakers, Kewsong Lee and Glenn Youngkin, as co-chief executives to take over from founders David Rubenstein, William Conway and Daniel D’Aniello. Goldman Sachs, meanwhile, planned for the retirement of CEO Lloyd Blankfein by naming investment banker David Solomon and chief financial officer Schwartz as co-presidents.

Solomon beat out Schwartz for Goldman’s top job in 2018, a position he continues to hold as questions mount over its pandemic hiring spree and push into retail banking. Schwartz went into retirement but was unexpectedly appointed as Carlyle’s new leader on Monday.

Schwartz is taking the helm of Carlyle after its succession plans went up in flames with the abrupt resignation of Lee this past summer. (Youngkin left in 2020 to enter politics and is now governor of Virginia.)

Over the past six months, Carlyle sounded out interest for its CEO role from many of Wall Street’s biggest names, including Nasdaq chief executive Adena Friedman, Goldman president John Waldron, former Morgan Stanley chief operating officer Jonathan Pruzan and Citigroup CFO Mark Mason.

Last week, Schwartz emerged as an external frontrunner who was keen to take the job and came with few complicating issues such as large unpaid carried interests or non-compete agreements.

He’ll take the reins at a fraught moment for Carlyle, which has lagged competitors like Blackstone, Apollo and KKR in growing its overall assets.

Peers of Schwartz told DD he was a skilled operator who navigated Goldman’s trading division through the financial tumult of 2008. But some questioned whether an executive steeped in the securities business would succeed at a private equity firm.

The incongruity hints at what may be ahead for Carlyle.

As CFO of Goldman from 2013-17, Schwartz pared back Goldman’s balance sheet and made its trading operations more efficient to meet burdensome regulatory requirements.

Those skills may fit Carlyle’s needs. Its margins have trailed rivals and Schwartz could be forced to make potential cuts.

In a note to employees, Conway said Schwartz carried “a demonstrated ability to harness the potential of organisations to fully capture growth opportunities in all macroeconomic and regulatory environments”.

A potential solution to Carlyle’s recent struggles emerged during its CEO search. The FT reported last year that BlackRock had informally considered a takeover, but never moved forward with the idea. Bankers said Carlyle would appeal to asset managers and insurers looking to expand in alternative investments.

Schwartz was granted $180mn in stock awards by Carlyle in a 5-year pay package heavily tied to its stock price. It positions Schwartz to make more money than Goldman CEO Solomon in the coming years, but only if Carlyle’s stock rises.

Crucially, it would vest if Carlyle was to find a buyer under Schwartz’s watch.

Harmony for the Rothschilds

The Rothschild family motto is Concordia, Integritas, Industria — harmony, integrity, industry.

It’s fitting then that their holding company Concordia is the vehicle through which they intend to buy out remaining shareholders in their investment bank Rothschild & Co, swapping the tumult of a public listing for the relative harmony of the private markets.

On Monday morning, Concordia announced plans to take Paris-listed Rothschild & Co private in a move that values one of the most renowned names in global finance at €3.7bn.

The enlarged Rothschild family concert, including Concordia, already holds about 55 per cent of the share capital and two-thirds of the voting rights of Rothschild & Co. Lower liquidity in the stock and the family’s existing control are arguments in favour of a take-private deal.

Concordia plans to offer €48 per share, a 19 per cent premium to Friday’s closing price.

A complete buyout of the firm would further tighten ownership, a logical step given “discretion is in the Rothschilds’ DNA”, as Lex points out. It would also be the latest milestone in the family’s efforts to increase control.

The seeds of the family’s banking empire were planted in war-torn Europe in the early 1800s, when the sons of Mayer Amschel Rothschild left their native Germany to spread the family name across the continent.

The French branch faced setbacks, though: it was seized by the state during the second world war and suffered another nationalisation in the 1980s.

The current structure of Rothschild & Co dates back to a 2012 merger between the then-separate French bank and UK merchant bank NM Rothschild & Sons.

The deal, which was orchestrated by then-chair David de Rothschild, 80, unified its corporate structure under the French parent group and put an end to decades of cross-Channel rivalry.

Four years ago, there was a changing of the guard at the group, when de Rothschild stepped aside and passed the reins to his son Alexandre, 42, who became the seventh generation of the family to lead the bank.

DD wonders if they’re saving a special bottle of Château Lafite — the family’s Bordeaux vineyard — for the closing dinner.

We’d also like to commend the reader below for leaving us with this witty comment.

Eurazeo’s boss is outnumbered by shareholders

In the cut-throat world of publicly listed private equity, even masters of the universe must answer to shareholders.

Such was the predicament for Virginie Morgon, who was ousted from the top job at France’s Eurazeo after losing the support of its two largest investors.

Morgon, one of the rare female leaders of a private equity group, joined Eurazeo in 2008 and took the helm a decade later. Her playbook was to try and diversify beyond its roots in domestic mid-market buyouts, including areas such as tech and venture capital, and expand internationally.

That focus on breeding champions — no doubt gleaned from her days advising some of France’s largest companies as an M&A banker at Lazard — paid off. Eurazeo’s assets under management more than doubled from €16.8bn to €32.4bn during her tenure.

Despite a string of successful deals, however, the firm’s share price didn’t budge much over the years.

Investors weren’t pleased. Eurazeo’s largest shareholders are the Decaux family and the David-Weill family.

On top of Eurazeo’s lacklustre stock price, both had gripes with the slow speed of its push into asset management and Morgon’s management style, which they said wasn’t collegiate enough, people familiar with the situation told the FT’s Harriet Agnew.

It didn’t help that Michel David-Weill, the late Lazard chair and Morgon’s longtime ally and mentor, could no longer rally on her behalf to the rest of the family.

Ironically, the Decaux family had previously been a white knight at Eurazeo when they purchased Crédit Agricole’s 15.4 per cent stake in 2017 and blunted the push for change from another shareholder Tikehau Capital, who later exited the stock.

It appears that Morgon’s successor will have a lot of people to please. The group has named two new co-chairs, Christophe Bavière and William Kadouch-Chassaing, to a revamped executive board meant to help balance out the power structure.

Job moves 

• Vantage Towers chief executive Vivek Badrinath plans to step down due to “personal reasons” by the end of this year. The move comes shortly after activist Elliott Management took a stake in the company.

• Rolls-Royce has hired BP veteran Nicola Grady-Smith as chief transformation officer.

• Goldman Sachs has moved senior dealmaker Matt Gibson into a new role leading sales in its newly renovated asset and wealth management business, per Bloomberg.

• Moelis has hired Evan Green, Goldman’s former head of Pipe investments, as a managing director to lead its west coast capital markets business from Los Angeles.

• Paul Leech and Todd Sandoz, who have co-led Barclays’ equity trading unit since 2020, are leaving the UK lender, according to Bloomberg. Global markets co-head Stephen Dainton will run the equities unit on an interim basis.

Smart reads

Inside man Billionaire investor Nelson Peltz may have a secret weapon in his proxy battle against Disney: Marvel chair Isaac Perlmutter, whose $2.4bn stake in the company and support of the activist could move the needle, the FT reports.

Dr crypto In the Halcyon days of FTX, Sam Bankman-Fried brought in his longtime psychiatrist to counsel employees at the fast-growing crypto exchange. When the group descended into chaos, his role became more integral, The Wall Street Journal reports.

Jig is up for ‘Texas two-step’ A landmark court decision could jeopardise Johnson & Johnson’s bankruptcy scheme to manage billions of dollars of legal claims from cancer sufferers, the FT reports.

News round-up 

Adani to repay $1.1bn share-backed loan early in push to stem crisis (FT)

Spanish court upholds Orcel’s Santander claim but cuts payout by €8mn (FT)

World’s biggest gold miner Newmont offers $17bn for rival Newcrest (FT + Lex)

Renault and Nissan foresee greater ‘freedom’ in alliance reset (FT)

Manchester City accused of financial rule breaking by Premier League (FT)

Interview: Broadcom chief Hock Tan seeks more acquisitions after $69bn VMware deal (FT)

Why some women are ditching Big Law for smaller firms (FT)

Self-storage M&A: US rivals jockey to grow asset bases (Lex)