Investing with The Carlyle Group’s Sandra Horbach

Market Context and Industry Evolution

• The private equity (PE) industry has shifted from a niche sector in the 1980s to a mainstream asset class with exponential growth in deal sizes, valuations, and competition.
• Early PE landscape (1980s) was characterized by:
  • Bank-affiliated firms dominating the market.
  • Very few independent firms, primarily Forsman Little and KKR.
  • Low industry recognition compared to investment banking among business school graduates.
• Sandra Horbach joined Forsman Little as the sixth investment professional in 1987, attracted by the potential to work directly with companies and management teams to drive value.
• Structural shifts in the modern industry include:
  • A transition from generalist models to specialized, deep sector expertise.
  • Integration of functional capabilities (digital technology, talent) alongside traditional investment analysis.
  • Innovation in fund structures and asset classes to meet limited partner demands.
  • A convergence where "every deal is a tech deal," driven by digital transformation in operations and culture.

Investment Strategy and Operational Philosophy

• Portfolio selection criteria focus on:
  • Market leaders positioned with attractive secular tailwinds.
  • Management teams capable of building sustainable cultures and empowering employees.
  • CEOs who are constant learners adaptable to rapid disruption.
• Value creation drivers include:
  • Applying technology levers (automation, robotics, IoT, digital customer acquisition) to improve efficiency and market expansion.
  • Long-term investment horizons (5–10 years) to navigate short-term volatility.
• Environmental, Social, and Governance (ESG) is treated as a comprehensive investment process rather than a separate product line.
  • ESG integration aims to enhance business success and is applied across all global platforms.
  • Carlyle believes constructive ESG approaches enable businesses to improve and grow.

Diversity, Equity, and Inclusion (DEI) Initiatives

• Carlyle has implemented a DEI strategy where:
  • More than 50% of the firm's assets under management are run by women.
  • Employees set personal DEI objectives reviewed annually and tied to compensation.
  • A DEI award program was launched with a $2 million payout distributed to 50 recipients in the first year, based on hundreds of nominations.
• Mentorship and sponsorship are core pillars of the DEI effort:
  • Over 500 employees are currently involved in the formal mentorship program.
  • Focus is placed on strategic sponsorship, stretch assignments, and encouraging risk-taking among high-potential talent.
• Horbach emphasizes that women should:
  • Volunteer for tough assignments to become indispensable.
  • Align with organizations that offer strong sponsorship and culture fit.
  • Utilize their voice and focus on high-quality performance in current roles to generate future opportunities.

Macro Outlook and Forward-Looking Statements

• Current market challenges include:
  • Slowing economic growth, rising inflation, and geopolitical conflicts.
  • Significant volatility and uncertainty regarding recession risks.
• Investment approach in this environment:
  • Viewing short-term volatility as a source of attractive long-term opportunities.
  • Prioritizing companies capable of performing independently of market conditions.
• Personal outlook for the next 30–40 years:
  • Hope that future generations (specifically Horbach's daughters) will operate on a level playing field where diversity is so embedded it is no longer a subject of active debate.
  • Anticipation that more opportunities will exist for women to fulfill ambitions without structural barriers.

Key Historical Anecdotes and Lessons

• First investment: A leveraged buyout of the conglomerate Stanadyne, specifically acquiring its "crown jewel," Moan Faucets (single-handed faucet manufacturer).
• Key professional lesson: The most significant learning comes from investments with non-linear paths; the toughest deals often yield the greatest satisfaction.
• Professional influence: Ted Forsman, founder of Forsman Little, is cited as a primary influence for 18 years of working and learning together.
• Core investment philosophy: "Quality always prevails" regarding companies, management teams, and deal structures.
• Current reading: The Happiness Advantage by Shawn Achor, focusing on positive leadership attitudes and their correlation to superior business results.

Podcast Metadata and Disclaimers

• Recorded date: May 23, 2022.
• Participants: Alison Mass (Goldman Sachs) and Sandra Horbach (Carlyle Group).
• Disclaimer: The podcast does not constitute research, financial advice, or a recommendation; statements reflect views as of the recording date.