- Kewsong Lee became sole CEO of the Carlyle Group last week after leading the $ 221 billion private equity firm with Glenn Youngkin for two and a half years.
- Business Insider spoke to 20 people who worked with him and they painted a picture of a change agent who is direct, energetic, and not afraid to question conventional thinking.
- During his seven years with Carlyle, he has cut below-average strategies, revised some executive pay, and built new business for the listed private equity firm.
- You can find more stories on the Business Insider homepage.
Kewsong Lee knows what it's like to be in a crisis.
The 54-year-old private equity manager, who has just become the sole CEO of The Carlyle Group, saw the bottom during one of his 2008 major collapses, the pension insurer MBIA Inc.
And as the people who worked with him confirm, he worked closely with MBIA executives to save the company.
"We all just fetched water to prevent the ship from sinking," recalls a former MBIA leadership member.
During the weekly board meetings, Lee helped work out details to outsource parts of his business that were badly hit by the credit crunch.
The company later faced a rush of litigationBut with the help of Marc Kasowitz – the lawyer now known as Donald Trump's attack dog – they fought the big banks and hedge funds over alleged fraudulent transactions and reached an agreement with the Bank of America that gave MBIA $ 1.7 billion.
A senior executive remembers that Lee had a catering dinner at his home in Larchmont, New York, shortly after Hurricane Sandy, where he and his lieutenants broke bread and enjoyed the win for a moment. The flooding caused by the hurricane had barely stopped at Lee's back door, he recalled.
"The wine flowed and we thought we had overcome a big hurdle. But there would be other storms," said the person present.
MBIA has not recovered today as the stock price has dropped to $ 8.02. from $ 38.19When Warburg Pincus – the company Lee had been working in at the time – injected $ 1 billion into the company, hoping it would pay off.
Lee's determination as a private equity manager will serve him well by taking the helm of Carlyle, a company that manages more than $ 221 billion in assets and, like his peers, was badly hit by the coronavirus pandemic , when the public health crisis plummeted sales of portfolio companies and creates uncertainty in others.
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Conversations with 20 executives who worked with Lee paint a portrait of a dealmaker who is determined, energetic, and doesn't like fools.
He is direct, they say, and he does not mind telling people that they are wrong, a quality that other executives do not do so well. And he is often quick to ask colleagues challenging questions and at the same time seek the opinions of others.
The qualities add up to a person who questioned the status quo at Carlyle, a company he joined in 2013 from competitor Warburg Pincus.
Lee initially joined as deputy chief investment officer for corporate private equity and quickly shaped other areas of the company. He restarted his credit department by hiring a manager, parting with another, and then building a new team to help close the hedge fund unit and revise the pay for fundraising executives – measures that ultimately work led to departures.
The job was not a job for the faint of heart and will be even more difficult as the pandemic challenges many parts of Carlyle's business, including deterioration in infrastructure and energy performance.
Lee, whose mindset was somewhat controversial internally in 2013 due to the founders' decision to bring an outsider into the lead, must ensure that the private equity giant continues to deliver Carlyle-quality returns while adding talent with a more collaborative approach Keeps culture intact.
Glenn Youngkin, a 25-year-old Carlyle veteran who has been co-CEO with Lee since 2018, announced last week that he would retire and start working in the civil service. The loss of Youngkin, a cultural carrier at Carlyle, means that Lee has more freedom of choice, from developing new products to crafting with the workforce. And people who know Lee say that its 1,775 employees should be prepared for change.
A person working with Lee pointed out Lee's broadly positive outlook for the Asian economy, saying he could see Carlyle being more aggressive in Asia, and given Lee's background in the insurance industry, that Carlyle's takeover of AIG's Fortitude Re manage in 2019 The company is plowing more investment money into the sector and into financial services in a broader sense.
"Kew sees opportunities in times of need or market uncertainty, and then you invest capital," said the person.
Lee also signaled this at Carlyle's second quarter earnings call on Thursday, saying Carlyle would try to make more insurance acquisitions, noting that the Asian economy – especially China – was not as badly affected as other parts of the world.
"What we notice is that this recovery is really uneven," said Lee. "From a regional perspective, Asia is clearly ahead, and we estimate that China is unlikely to go into recession this year."
He also admitted that while COVID-19 had an impact on infrastructure and energy, investment in these sectors did not disappear completely, which expressed the optimistic long-term prospects for infrastructure, renewable energy and alternative forms of energy.
"We have teams looking at that," he said, "but sure, this is not a change, a snap, an entire sector is gone. It will take some time. There will be bumps on the road." And there is clearly a transition. "
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Lee cut his teeth as a dealmaker and pioneered Warburg Pincus
To better understand what Lee's leadership means for Carlyle, it's helpful to consider his background.
With positions at McKinsey & Co and Goldman Sachs at the beginning of his career, he made a name for himself at Warburg Pincus in the area of private equity and worked there at a time when executives started making larger buyouts instead of just growing support companies.
Within the company, according to people who worked with him, he worked as a natural contact for peers and was looked after by Sid Lapidus, who is now retired but likes to look back on his time with Lee and help with the purchase and then sell luxury – retail chain Neiman Marcus, Bloomberg placed at a profit of 150%.
"Kew is very smart. Great instinct. And he has a good foundation for the business world," said Lapidus, noting that he was proud to call Lee his protégé.
"And he knows a lot about people. And that makes him a good manager."
Lee's skills as an employee came to bear on another investment in Warburg when he helped purchase the TransDigm Holding co-manufacturer for aerospace components in 2003 for what the Wall Street Journal put in at $ 1.1 billion.
Nick Howley, founder of TransDigm, remembers Lee as a diplomatic board member who brings stakeholders together to find a middle ground to reach consensus on contentious issues. Lee's conviction also helped Howley focus on the idea of making TransDigm public in 2006.
"I was very reluctant just because my previous public experience with so many external investors has not been very good," he said. "He was very helpful in getting me over the hump … And in retrospect he was absolutely right."
It hasn't always worked out so well, but Lee has shown other executives that he can roll with the punches.
At MBIA, a director at the time, Dan Kearney, said he was impressed by Lee and Warburg's commitment to holding the investment through, and also by Lee's behavior in the boardroom, knowing when to step on the gas when needed.
"If an investment banker came in with a poorly thought-out scheme, his questions could really wither."
Lee's sign on Carlyle
When Lee joined Carlyle in 2013, not every manager greeted him with open arms.
His mere presence irritated at least one other executive in the company management, the people who worked there at the time.
But Lee didn't take a step and made a name for himself with the launch of a new product called Long-Term Funds.
The funds enabled investors to support companies that would not necessarily be sold in the typical three to five year cycle, but would remain under management for a decade or more.
"It was a hot new idea," recalls a manager near Carlyle. "Now the other companies are doing the same."
Lee's approach from the start was appreciated by the company's founders, and Bill Conway in particular loved Lee. Conway, chair of the board of trustees of Johns Hopkins Medicine, prefers to stay out of the spotlight, but is influential internally.
"Bill is a tough hopper and has made [Lee] the second largest investor, which is likely his path to success," said the person near the company who spoke of Lee's long-term fund. "The fact that Bill Kews respects investment ability says a lot – a lot, a lot."
Lee is a Carlyle Change Agent
Many of Lee's initiatives took place in Carlyle's own halls. They supported the promotion of personal loans, prioritized diversity in the workplace and revised the private equity area.
One of his biggest initiatives was the restructuring of private equity, where executives sit in industry groups to gather resources across deal teams and improve collaboration.
According to a Carlyle manager, he leads an investment call at 7 a.m. on Monday morning with major fund managers and investment teams from around the world.
It is about communicating in such a way that everyone is on the same side – a departure from an earlier culture that some have described as being too silly.
However, some personnel changes may have been easier for Lee to implement than Youngkin, his co-CEO, given Youngkin's extended term, as suggested by those close to the company.
They indicated a change in payment for fundraisers, some of which felt that it was easy for them to check in with investors with whom Carlyle had longstanding relationships. At least two fundraising managers have left the company in the past two years, while the group leader has served as a senior advisor.
Lee's role as a change agent, supplemented by Youngkin's role as a cultural guardian, are dueling qualities that many companies take into account when assessing leadership skills, according to professors who deal with succession planning.
And now that there is no Carlyle veteran who could offset Lee as the co-CEO, some who are close to Carlyle have wondered if the company could get even more breakneck.
We asked Bill Klepper, a professor at Columbia Business School, to weigh it up. Klepper studied succession in companies and wrote a book that touches on his research: The CEO's CEO: Hard love in the boardroom.
Typically, he says, it is a positive feature of a leader to be a status quo challenger, especially in private equity firms, because changing circumstances mean they have to turn in a penny. They can also be risk takers, he said with a short-term mentality.
"And when you get to the root of your being, you're obsessed with results and action," he said.
"In one case, change can be good. But be careful. Constant change is destabilizing."
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