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OPINION February 2, 2012

My Experience as a Private-Equity CEOManagers like me are required to put our own capital into the company.

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Opinion

By ARMAND F. LAUZON JR.

In the past 10 years, I've been the CEO of three companies owned by the Carlyle Group,a major private-equity firm. I've watched with interest, therefore, as the private-equityindustry in which Mitt Romney thrived has been portrayed as dedicated to corporateraiding, to profiting as it destroys. In the companies I've run and the private-equityindustry I've observed, nothing could be further from the truth.

Private-equity firms exist for one reason: To create value for shareholders, the largestpercentage of which are public pension funds. Firms do this by finding and investing inunderperforming businesses that have potential for growth.

Many of these businesses have something unique and valuable about them but havebeen victims of poor management, lack of investment, or an inability to adapt to newmarket conditions. If a business under private-equity management doesn't grow, there'slittle chance of returns for investors and jobs can be put at risk.

The power of the private-equity model is that, unlike in the traditional corporate model,the interests of investors, management and employees are aligned. Managers like meare required to put our own capital into the company. Some call this "skin in the game"—Icall it being an owner. And we all know that ownership is a powerful motivator to care andsucceed.

That's why in each of the companies I've run we've made key managers owners too,through stock ownership. And we've engaged employees, including some unionizedones, with performance-based incentive programs to ensure we're all working towardpositive outcomes.

My clear mandate at every company has been to increase revenues, develop newproducts and markets, drive profitability, and create a sustainable business for the benefitof shareholders, management and employees. Our view has been distinctly long-term.

Firth Rixson was a Carlyle-held metal forgings company I ran from 2002-05. During thattime we doubled revenue, improved profitability and opened new facilities. Today, Firth isa market leader with 2,000 employees and a bright future.

In 2005 Carlyle asked me to lead John Maneely Company, a previously family-ownedsteel pipe and tube manufacturer that didn't have the management capacity to competewith low-cost Chinese imports. Working with Carlyle, we achieved significant growth byimplementing best-in-class manufacturing processes and incentive programs with UnitedSteelworkers employees. Today, Maneely is one of the largest steel pipe and tubemanufacturers in North America.

Armand Lauzon: My Experience as a Private-Equity CEO - WSJ.com http://online.wsj.com/article_email/SB1000142405297020474090...

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I now serve as CEO of Sequa Corporation, a diversified manufacturing and aircraft-engine repair company. Carlyle invested in Sequa in 2007 because it believed thateffective management could unleash the company's technologies to yield greater growth,profits and opportunities for employees, investors and customers. Like othermanufacturers, we hit major headwinds during the great recession. But through supportand long-term, patient capital from Carlyle, we have managed to grow and expandprofitability and competitiveness across the company.

It's a fact of life that some companies don't survive, even after millions of dollars ofinvestment from private equity or elsewhere. Still others go through painful transitionperiods on the road to recovery. But I can say with certainty that today's private-equitymodel is about growing companies by adding value to generate premium returns.

Private-equity firms are not perfect, but they can be lifelines when the future of acompany is in question and jobs are at stake. Many tough decisions are often necessaryto ensure a business's long-term success, but the drive to succeed ultimately encouragessolutions that create stronger companies and new jobs over time. The alternative simplydoesn't work for anyone.

Mr. Lauzon is CEO of Sequa Corporation, which was acquired by the Carlyle Group in2007.

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Armand Lauzon: My Experience as a Private-Equity CEO - WSJ.com http://online.wsj.com/article_email/SB1000142405297020474090...

2 of 3 6/6/12 4:14 PM