Doug Brandely and Will Langenstein from the Carlyle Groupa major private equity firmspoke to the class on Tuesday, February 15^th. Mr. Brandely stated that operational improvements account for a large portion of total value creation in the companies Carlyle acquires. (Real change [as opposed to simply increasing financial leverage] is required to drive the internal rate of return to 20% or more.) Indeed, Doug noted that the proportion of total wealth creation attributable to operational improvements at the companies Carlyle acquired rose from 38% on average in the first decade of the 21^st century to 64% on average in second decade of the 21st century while the contribution of leverage fell from 24% to 13% during the same period. He also discussed the four characteristics of successful deals and said that the most important factor by far was an aggressive operational improvement plan. Carlyle usually retains the existing senior management team in the companies that it acquires. Given that, Carlyles success in generating significant value creation from operational improvements alone in the companies it acquires (and the failure of the same senior managers to generate substantial wealth creation from operational improvements at the companies before Carlyle acquires them.) might best be explained by:

A. Carlyles incentive compensation for managers which ranges from 5% to 10% of equity.

B. A substantial and persistent increase in exit multiples over time

C. Substantial synergies from Carlyles large portfolio of companies are always available.

D. The use of Carlyles lower WACC than the WACC of the company acquired

E. A sustained period of low interest rates which has reduced the value of leverage for all.