By Dan Primack
November 21, 2011

Shortly before The Carlyle Group filed for its IPO in September, I wrote a blog post comparing Carlyle to The Blackstone Group. A “tale of the tape” sort of thing, which showed how Carlyle was about to surpass Blackstone as the world’s largest and most diverse alternative investment firm.

On Friday it took yet another step in that direction, by acquiring mid-market lender Churchill Financial Group.

The deal is a bit complicated, in that Carlyle is not actually acquiring the equity in Churchill’s $1 billion revolving CLO, which has around 2.5 more years to go (it did four deals last week). That remains with Olympus Partners, a private equity firm that acquired Churchill at a discount from Irving Place Capital in the aftermath of Bear Stearns’ collapse (Irving Place used to be Bear Stearns Merchant Banking).

Instead, Carlyle is taking 13 Churchill investment pros who will leverage the Carlyle platform to raise new funds, while continuing to manage out the existing CLO (with Carlyle taking a cut of fees). Churchill’s website currently lists 31 professionals, which means that deal also results in 18 people losing their jobs.

Both Carlyle’s Michael Petrick and Churchill boss Ken Kencel tell me that Olympus didn’t have interest in selling the equity, while Kencel added that there wasn’t any sort of auction process. “This was the result of existing relationships between executives at both firms,” he explained. The acquisition is not related to Carlyle’s recent launch of a mid-market private equity effort, which is housed in a different business unit.

[Update: Rob Morris of Olympus tells me that there was indeed a process with five interested firms, but that it was kept so quiet that Kencel wouldn’t have known. “We were not selling the equity. This was basically a process to outsource the admin function… once we received a multiple step upgrade on ratings from agencies in September the reinvestment period on the CLO effectively was locked in, so this was the next move to let the team go build another lending business while our fully invested CLO stayed managed at a lower cost by the same team.”]


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