Adam Palmer remembers the March 2021 day when he and Brooke Coburn were going to interview potential investors at home outside Washington, D.C., who just did it. Palmer and Coburn left Carlyle Group In the mid-term of Covid-19, when most companies were still working from home, they set up their own private equity firms in the mid-term of Covid-19.
“No one is in the office. The world is closed,” Palmer said.
Sitting at Palmer’s dining table, he and Coburn will discuss plans to build a private equity company with possible investors, employees and consultants. They don’t have a name, but the company will invest in companies and products that protect the United States and its military personnel. Fortunately, the outside is gentle, so they keep the windows open.
Palmer told wealth.
It took about a year or so, but the company that eventually called itself a congressional meridian partner did get the office. In March 2022, the PE company opened on K Street, Meridian, Capitol, Washington, DC, and now has 14 employees. About 10 of them, including Palmer and Coburn, have worked for the Carlyle Group during their careers.
The Capitol Meridian is part of a focus on PE Specific departmentsdevelop deep expertise and networks to understand the unique challenges and opportunities facing these industries. Industry experts usually have an advantage over generalists. The Capitol targets defense and government services. The company invests in companies that provide hardware, software and services to the national security and aerospace markets. The timing couldn’t be better. according to data From the investment bank Greenwich Capital Group. As of March 31, aerospace suppliers had a return on performance of 108.7%, while defense suppliers grew by 32.8%. By comparison, the S&P 500 index was obtained in the same period and Nasdaq Increased by 22.4%.
Emotional shifts, mostly due to geopolitical issues such as Russia’s invasion of Ukraine in 2022 and more recently The United States offensive On Iran’s nuclear website, defense companies and their investors are benefiting. Larger PE companies like Veritas Capital aim at aerospace and defense and national security as one of its sectors. Veritas set Earlier this year, its ninth fund exceeded $13 billion. “Today, investors in defense are more interested in more than I remember,” Palmer said.
However, the Capitol Meridian has not invested in products such as pistols that can graduate from high school. “That’s not where we focus on,” Palmer said.
Instead, Capitol Meridian bets on businesses that “support the state and the fighters, or American soldiers and women.” Although he had never joined the army, his father was a reserve in Vietnam and his grandfather served in World War II.
In 2024, Capitol Meridian shrugged the tough fundraising market Increase $900 million in its first pool plus $300 million in co-investment. Palmer and Coburn are the third largest investors in the pool. To date, Capitol Meridian has acquired stakes in six portfolio companies and has received 20 additional transactions. It has not yet been exported, Palmer said. He said the company is still in the early stages of its life cycle, with its oldest investment being three.
Defense is usually not a division that favors new entrants or generalists, said Matt Autrey, a partner at Adams Street Partners, an investor at Capitol Meridian’s first fund. “Adam and the Capitol Meridian team have been able to successfully invest in the Department of Defense due to the expertise and network they have in the field,” Autrey said in an email.
Hire for breakfast
Palmer has a long history of defense and aerospace investments, with over 25 years. In the mid-1990s, he was a financial analyst with Lehman Brothers, who carried out some deals for Carlyle, a Washington, D.C. private equity firm known for its political ties. (George W. Bush sat on the board of one of the portfolio companies).
Bill Conway, one of Carlyle co-founders, recruited Palmer for the breakfast meeting. A few days later, he received a fare letter. Palmer is only 22 years old. “That’s a different world,” he said.
Palmer’s first deal with Carlyle was $750 million for the company get In 1997, the United Defense Industries, a manufacturer of combat vehicles, naval guns and missile launchers. Carlyle profit. The United Nations Department of Defense is widely regarded as one of Carlyle’s best and most famous early-stage investments. The deal also brought Palmer’s ambitions to death. He found it very meaningful to invest in businesses that “support the country and American military and women.”
Other wins include Carlyle’s acquisition of naval ship repair company Titan in 2019, which sold four years later and earned nearly four times the return on investment capital. In 2000, Carlyle dug up the plane and sold it ten years later, earning five times the return. Palmer’s deal is so noteworthy that he was introduced in 2010 wealthofUnder 40 years old,Insiders predict he may one day lead Carlyle. The following year, Palmer was name Carlyle Co-Head of Global Aerospace and Defense Department.
PE or alternative asset manager?
Despite Palmer’s achievements, things are still changing for Carlyle. In the 1990s, Carlyle was a middle market company known for its defense transactions. Like many groundbreaking PE companies, Carlyle will grow with every success. It’s gone people In 2012, it improved The largest fund ever (US$18.5 billion) began investing in sectors other than private equity in 2018. It also began to call itself an “alternative asset manager.”
Carlyle began to focus on defense, investment in consumers, healthcare, industry and technology in the 2000s. Palmer and Coburn were appointed deputy CIOs in 2018, and they didn’t care about Carlyle’s “elephant hunting” style investment style, where they sought fewer, bigger deals.
In early 2021, Palmer and Coburn learned that Carlyle would not raise another intermediate market fund, but chose to leave. They decided to set up a new, smaller company, instead of the Carlyle clone, which will return them to the roots of the middle market. Palmer defines the intermediate market as a transaction below $1 billion. “The opportunity to get the best returns in this area, defense and national security are the central market,” Palmer said.
Although geopolitical tensions remain high, Congress Meridian is expected to return to its second pool of fundraising market soon. Invest about 60% of its first fund. (PE companies usually start marketing when investing 70% of funds.)
Fundraising is still difficult. Several large PE companies have been working hard to raise funds. Carlyle closure According to 2023, its Eighth Banners will start at $14.8 billion, well below its $22 billion target. Acquisition. TPG Looking for the latest flagship store of $13 billion, below the requirements of its previous fund Wall Street Journal Report in May. Black Stone Its latest flagship store is expected to end in mid-2023, but the pool is not closed until earlier this year $21 billionfar lower than its initial Target $30 billion.
One familiar with the situation said the Capitol Meridian is expected to seek a next pool of more than $1 billion. Palmer declined to comment.
Palmer still has a dining table, the one that started at the Congress Meridian a few years ago, hidden in the company’s office. His Capitol goal is still simple. “We want to be the best small PE partnership to help our service staff,” he said.
