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Super investor who passed up Facebook

Canberra Times logo Canberra Times 16/05/2014 Jonathan Shapiro
Carlyle Group's David Rubenstein knows how to make serious money, but admits he's no trend spotter. Carlyle Group's David Rubenstein knows how to make serious money, but admits he's no trend spotter.

Private equity titan David Rubenstein says rising stock market valuations and low interest rates are tempting buyout firms to take on more debt to buy expensive companies.

"The markets are not cheap. Interest rates are low and debt is relatively available and it is tempting to take this debt to buy companies," said Mr Rubenstein, the CEO of $US170 billion private equity firm Carlyle Group, which he founded in 2007.

Mr Rubenstein, who was speaking at the SALT hedge fund conference in Las Vegas, said private equity firms were paying 2007 prices but were using more debt.

"In 2007 the average EBITDA multiple was 9.7x Now its 9.7x again but the average leverage 5.3 times, now which is higher than 2007"

"It's hard to find deals because the valuations of publicly traded companies are high and have a lot of cash. So they tend not to sell things"

Mr Rubenstein, who is one of the major personalities in the multi-trillion dollar private equity industry, says valuations are only exceeded by the heady multiples paid by the tech giants to acquire smaller start-ups.

"The thing that seems most expensive is the tech deals like WhatsAp [which was bought by Facebook for $US19 billion] I wouldn't say investors are stealing companies now," he said

Carlyle Group has been a benificiaries of the trend. The fund may have notched up another winner with its investment in head-phone maker Beats. But Mr Rubenstein is no trend spotter.

Apple is reportedly willing to pay $US3.2 billion for Beats, which will net Carlyle Group a$US1 billion profit.

The PE firm invested alongside James Packer and Dr. Dre, who will become first billionaire rapper due to his investment.

"I am the last person to spot trends. We invested in Beats I had not heard of Dr Dre when I met him," Rubenstein said.

He'd also never heard of Brian Chesky, the founder of online accommodation website Airbnb,(now worth $US10 billion) when he was recently introduced to him by Bill Gates.

Mr Rubenstein said he also brushed off a young-man that his daughter had introduced him to more than a decade ago that was looking for money, because he thought his idea would never work.

"His name was Mark Zuckerberg and his company was Facebook."

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