Handelsblatt Interview

Europe Has the Edge

  • Why it matters

    Why it matters

    The private-equity branch faces tense competition these days that is driving down returns. Getting a good deal for investors has become harder.

  • Facts


    • David Rubenstein is cofounder and chief executive officer of Carlyle Group, a U.S. private equity firm.
    • Carlyle managed some $158 billion in assets at the end of 2016 and wants to raise another $100 billion over the next four years.
    • He is one of the 300 richest people in the United States with a net worth of $2.5 billion according to Forbes.
  • Audio


  • Pdf
Morgan Stanley Chief Executive Officer James Gorman Speaks On The David Rubenstein Show
David Rubenstein says he's confident Donald Trump will learn on the job. Source: Bloomberg

David Rubenstein loves hunting for deals. And with the hunt only getting more intense in the private equity markets these days, finding those well-priced deals is getting harder, says the cofounder of Carlyle in an interview.

Mr. Rubenstein, 67, is among the 300 richest people in the United States, though he is also known for making generous donations, especially for historic preservation. His firm managed $158 billion, or €150 billion, in assets at the end of 2016, invested through funds in companies, restructuring cases real-estate and loans. Carlyle hopes to raise another $100 billion over the next four years.

He also counts the new U.S. President Donald Trump, whom he last met in December, as a friend. Like many in the financial sector, where stocks have surged to new heights, Mr. Rubenstein says Mr. Trump could be good for the economy. And yet, given the high stock valuations, he says the better deals to be had are in Europe at the moment.

Read the full interview below, edited for content and clarity, or a summary version here.


Handelsblatt: Mr. Rubenstein, you are the son of a postal worker. So is Lloyd Blankfein, the CEO and chairman of Goldman Sachs. What is it about the sons of postal workers?

David Rubenstein: I guess they come from very modest circumstances and realize if they’re going to get anywhere, they have to do it on their own and are not going to be able to depend on their father giving them a lot of money or access or anything. Lloyd and I have bonded over that, I guess.

You have similarities as a result of this shared background?

Lloyd is a guy who I have admired for a long time. And I think he’s done a great job at Goldman. Generally, the people who come from upper-income families are not going to be as highly motivated as people who come from lower-income families. If you look at the wealthiest people in the United States, generally they came from very modest circumstances.

Is it still possible today for the son of a U.S. postal worker to make a career like you did?

Oh, sure. The people who will be the wealthiest people in the United States or Europe over the next 10 or 20 years are going to be blue-collar workers today. You rarely see somebody who is the son of a billionaire becoming a multi-billionaire himself.

Has your motivation decreased as your success has increased?

It’s the other way round. I have met people like Bill Gates, Warren Buffett, Mark Zuckerberg and Jeff Bezos. So I keep working harder. I work seven days a week. I don’t take any days off. And I don’t take any vacations. And I am motivated because I realize I am not going to have my brain or my body keep working for another 20 years at this pace. So I am trying to get as much done now before the brain or the body collapses. I am actually working harder than ever.

So what is it that motivates you?

I am trying to make my mother happy. I am the only child so she has nothing else to do other than read my press clippings. She calls me whenever she reads something about me. So it keeps her happy. I think people want to feel that you have done something useful with your life. And there is a biblical saying: “To those whom much is given, much is expected.’’ So as I have gotten more successful, people expect me to do even more.

Ironically you could find President Trump having to bail Mexico out because its companies may not be able to pay their debts to U.S. banks.

Let’s talk about the private equity industry. The sector is awash with cash at the moment, which is usually a sign that returns will come down. Do you expect that to happen?

Yes, probably.


When you have a lot more money than you did before, generally you bid prices up a little more than you would if you did not have competition. And higher prices probably produce lower rates of return. But they are going to be attractive enough to continue to attract a fair amount of capital.

The U.S. Federal Reserve is expected to raise interest rates in March. Will that be a watershed moment in the development of the market?

I think the Fed has signaled that it wants to increase interest rates at least two times and by maybe 50 basis points later this year. But this is still coming from a relatively low base, so I do not think it is going to have a big effect on our industry.

Are there some overleveraged companies owned by private equity that could run into trouble if rates go up?

I don’t have any in mind right now. The biggest problem is emerging market companies that have borrowed in dollars. So ironically you could find President Trump having to bail Mexico out because its companies may not be able to pay their debts to U.S. banks. Theoretically, that could happen.

Carlyle wants to raise roughly $100 billion over four years to invest. Why do you believe in such mega funds?

If you have more capital, you can do more deals. It is obviously more efficient to go out and raise money once every five years for a fund than every year. Deals are getting a little bigger so it does not seem inappropriate to me.

The number of private equity funds has increased rapidly over time. Will we see a consolidation down the line?

Some of the funds that are small might be interested in being bought by a larger firm. We bought some. I think Blackstone has bought some. I suspect that will continue somewhat. But most of our growth is going to be organic.

We have not seen many multi-billion-dollar deals done by private equity funds over the last year. Why?

Yes, that is right. Since the Great Recession there have not been any $30-billion buyouts because people got burned on those big deals. We never did anything that big. I doubt you will see those mega deals come back any time soon in the industry.

But if you are raising $100 billion, it suggests you are anticipating greater deal activity.

We expect more investment activity. But remember that some of the money we raise is for credit investment and other things like real estate.

We think Europe is relatively speaking underpriced and there is more value for money here than in the United States.

What is your interest in the German market at the moment?

Last year we bought Atotech from France’s Total for €2.9 billion. The company is based in Berlin but really has a lot of customers in China. The reason we invest so much in Germany is because you get highly skilled workers who are very disciplined. You get very good quality products that appeal to people all over the world. So yeah, we love to invest in Germany.

Would you generally like to invest more in Europe?

We are a big believer in investing in Europe. We have put in about $1.5 billion in the last year or so in about 20 different deals. We think Europe is relatively speaking underpriced and there is more value for money here than in the United States. So we have been very active here and we will continue to be.

Despite the political uncertainty?

There’s political uncertainty all of the time throughout history. When has it been completely stable anywhere? So we always live with that.

What will be the likely impact of the Trump administration on the private equity sector?

It will be positive because many of the things he is going to do will help the industry. Deregulation and his plans for lower corporate tax rates will probably be helpful. But the tax relief will take about a year to get done. It will not happen overnight.

His rhetoric has scared a lot of people around the world. But he is obviously taking the job very seriously.

You have met President Trump last December. What was your main takeaway from that meeting?

I went to talk to him about the importance of touching the symbols of our country. Visiting places like the African-American History and Cultural Museum, which we did last week. Visiting the original copy of the U.S. Constitution, the Declaration of Independence. Visiting Arlington Cemetery, the Lincoln Memorial. Things like that. Just getting more involved in the heritage and history of the country because he had not been as deeply involved in those things.

In Germany and Europe most people are disturbed by the way he is acting …

His rhetoric has scared a lot of people around the world. But he is obviously taking the job very seriously. And trying to do the best he can. His concern over most of his career was making money. That is not his main concern now. It is trying to do a good job and hopefully go down in history as a great president. Pulling that off is not easy.

Mr. Trump spoke to the U.S. Congress for the first time and seemed to strike a conciliatory tone. Is this a true change in approach or is this a tactic?

I suspect that people around him have told him that he has already been elected president and that he does not have to campaign for four more years. The job is to get legislation through and you do that through conciliatory kinds of language. I think he is adjusting, and giving that kind of speech is not something has done before. He does not like to give speeches off teleprompters. That is not what he is experienced at doing.

.. and he is not experienced in ruling a country like the United States ….

I often remind people: Suppose Hillary Clinton decided tomorrow that she wanted to be a New York City real-estate developer. People would say: “What, are you crazy? You do not know anything about doing development.’’ They would laugh at her. Trump is doing the opposite. He is a real-estate developer and has now become president of the United States, so he is learning.

You sound like you are a Trump supporter.

I don’t support anybody and I do not give money to any politician.

Why not?

Because I am the chairman of the Kennedy Center. I am the chairman of the Smithsonian. These are organizations that are dependent on federal government money. And I do not think it is appropriate for somebody in that position to be political. I am involved with many other Washington institutions and I just try to stay as non-partisan as possible.

Has Trump asked you to serve in any function in his administration?

Nobody has asked me to go into government. And I am not planning to go into government anyway. I have already served when I was a young man. I got inflation to 19 percent [Editor’s note: During the Arab oil crisis in the 1970s, inflation rose to 19 percent during the Carter administration for which Mr. Rubenstein was working at the time.] I am not interested in repeating that.

Mr. Trump has brought in a lot of people from the financial services sector in his government. People like you. Is that a good thing?

He has more business people than President Obama did. He has also got more generals than President Obama had. Who knows whether you are better off having more CEOs or more generals? Obama did O.K. President Trump knows a lot of wealthy business people so I suspect he will probably keep appointing a lot of them. I think it is good to have a mix of people of different kinds of backgrounds.

How do you assess his relationship with the media in the United States?

I guess it could only get better. I cannot imagine it getting worse. Clearly there is a lot of angst in the media over it, whether it is right or wrong. Time will tell whether things will modulate and people will get together and be more normal.

The people at the bottom do not think they can get to the top anymore. They have given up.

In Germany we have a huge debate about income inequality. Is this something you think about on the other side of the Atlantic?

Income inequality is a growing issue in the United States and in Europe and a growing problem for social mobility. Not only do people at the top have so much more money than people at the bottom, but the people at the bottom do not think they can get to the top anymore. They have given up. And therefore you get a lot of people who drop out of high school and they go into jail.

Unemployment of young people is an unsolved problem …

In the city I live in, Washington D.C., 25 percent of the people who enter high school do not graduate. In our juvenile justice system, 85 percent of the people are illiterate.

Does that concern you as a citizen?

Of course. We like to say our country is the greatest country in the world. We say that all the time. But how can you say “the greatest country’’ when you have a lot of people who are not able to get a decent job. So of course as a citizen I am concerned.

How confident are you that President Trump can deliver that relief to the middle class that he has promised?

I do not think income inequality has been the major focus of Trump yet. It may be down the road but that has not been an issue he has talked that much about.

You could run for office yourself. Your mother would like that, wouldn’t she?

I do not think my mother wants me to run for anything. I think she is happy with what I am doing right now. But my mother’s view is: If you are giving away money and doing things that are helping other people, that’s probably a good use of your time.

You don’t have any political aspirations?

No, I think after President Trump it is unlikely they will elect another businessperson, because I think you tend to elect opposites. But I am not running for anything.

You said you are still highly motivated. How long would you like to continue?

Pope Benedikt retired when he was 85 and I thought that was probably a pretty good thing. So probably somewhere between 85 and 90 I will slow down. Look, how many people have you read or heard about who retired at 58 or 59? They got their pension, and they went out to play golf, and they dropped dead when they were 60.

So you keep on working for health reasons?

That’s right. People who are working in their 70s and 80s, they don’t drop dead as easily. You know, John D. Rockefeller was working for a long time, and lived to 97. David Rockefeller was 102. Never give up and never stop working.


Handelsblatt Global Editor in Chief Kevin O’Brien, Handelsblatt’s finance editor Daniel Schäfer and Handelsblatt private-equity expert Peter Köhler conducted the interview. To contact the authors: obrien@handelsblatt.com, dschaefer@handelsblatt.com and koehler@handelsblatt.com

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