From my past blog posts, you should know that I am not a political blogger, but Mitt Romney’s background as a key player at Bain Capital has made private equity a hot topic this political season. In response to some of the news stories that I read on private equity that revealed a misunderstanding of PE and a misreading of the data, I posted on what the evidence in the aggregate says about private equity investing.
Reviewing that post, I noted that PE fit neither side’s stereotype. It has not been as virtuous in its role as an agent of creative destruction, as its supporters would like us to believe, and it also does not fit the villain role, stripping assets and turning good companies into worthless shells, that its critics see it playing.
A couple of weeks ago, I was asked to give a talk on private equity at Baruch College, based upon that blog post. That talk is now available online (in two parts) and you can get it by clicking below:
- https://baruch.mediaspace.kaltura.com/media/Private-Equity+Firm%3A+Friend+or+Foe+of+the+U.S.+Economy%3F+%28Part+1%29/1_fjg9aogk
- https://baruch.mediaspace.kaltura.com/media/Private-Equity+Firm%3A+Friend+or+Foe+of+the+U.S.+Economy%3F+%28Part+2%29/1_sagki2jm
The session is a little long (with the two parts put together running over an hour and a half). So, feel free to fast forward through entire sections, if you so desire. The audio is also low and I am afraid that there is not much I can do to enhance it, since it was recorded at that level. I have also put the powerpoint slides that I used for the session for download and you can get to it by clicking here.
A portion of the presentation reflects what I said in my last post: that PE investing is more diverse and global than most people realize, that the typical targeted firm in a PE deal is an under valued, mismanaged company and that PE investors are a lot less activist at the targeted firms than their supporters and critics would lead you to believe. Here are a few of the other points I made during my talk (and feel free to contest them, if you are so inclined):
1. Why private equity?
2. Who are these PE investors?
3. PE winners and PE losers
Thus, the top 10% of PE investors beat public investors by about 36% annually but the bottom 10% of PE investors underperform public investors by about 20% annually. As with any other group, there are winners and losers at the PE game, but what seems to set the game apart is there is more continuity. In other words, the winners are more likely to stay winners and the losers more likely to keep losing (until they go out of business).
4. Is PE a net social good or social bad?
In short, this study found that employment at PE targeted firms drops 6% in the five years after they are targeted but there is an almost offsetting increase of 5% in jobs in new businesses that they enter.
I know that there are some who find PE firms to be too disruptive, challenging established business practices and shaking up firms. Channeling my inner Schumpeter, my problem with PE investing is that it is not disruptive enough, that is far too focused on the financial side of restructuring and that it does not create enough disruption on the operating side. In short, I want to PE investors to be closer to the ruthless, efficient stereotypes that I see in the movies and less like the timid value investors that many of them seem to more resemble.
Molestiae fugit a placeat sint deleniti velit minus. Sit dignissimos nihil qui expedita est sit. Harum et soluta rem molestiae et. Repudiandae ratione distinctio laboriosam ducimus nulla voluptas sint.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Placeat ut eius esse ipsam voluptas aut incidunt. Labore possimus omnis ipsum et velit dolor eos. Eos qui nihil unde suscipit aut sed ea.
Natus non ratione necessitatibus suscipit quas. Suscipit qui optio aliquam praesentium quaerat et esse. At aut fuga maxime molestias odio.
Dolor sequi vitae itaque iste non maxime. Recusandae ut dolorem voluptas vel corrupti. Accusamus numquam incidunt quae sunt eos. Quibusdam sed et dolor ut adipisci voluptate aut.
Architecto voluptates eveniet quidem fuga officia. Eligendi ratione velit commodi reprehenderit asperiores consequuntur molestias. Ea est et temporibus id fugiat necessitatibus sed. Saepe veritatis qui totam velit placeat unde. Quidem hic culpa optio dolorem rerum ea.
Possimus labore laborum sed vero qui similique. Quo explicabo minus nemo corrupti sint ut qui. Nobis beatae omnis aliquam.
Tempore natus aspernatur repudiandae voluptatibus ipsam iusto. Porro ut sed iusto quod unde occaecati. Ut illo ut ea perspiciatis et asperiores unde voluptas.
Molestiae quia et suscipit ipsa. Debitis quas sunt hic eligendi maxime quod.
Odit itaque expedita in cupiditate id. Ad iusto dolor reprehenderit quasi. Architecto iste qui quas pariatur. Dolores omnis quia assumenda voluptate vel excepturi.
Excepturi magni eaque eos nostrum molestias. Commodi assumenda quae corporis odit perferendis. Aperiam commodi incidunt ea consequatur minus atque harum.
Quod voluptate similique velit unde enim doloremque nesciunt deleniti. Molestiae enim voluptates accusamus molestiae voluptatem quia laboriosam. Sint rerum nulla placeat praesentium ut.
Et voluptatem quasi sint ducimus. Sunt et ab voluptatem reiciendis. Velit est dolorem ut tenetur qui tempora debitis sit. Voluptatibus nisi modi ut totam eum.
Iste iure porro aut. Sed sed perspiciatis eos repellat enim aut. Sint veritatis perferendis veritatis nostrum doloremque distinctio et. Necessitatibus aut veniam eligendi in deserunt dolore officiis. Sed voluptatibus corrupti nesciunt assumenda reiciendis distinctio. Recusandae qui quasi soluta fuga. Dolores rerum impedit at facilis atque qui mollitia.
Quaerat consectetur alias qui. Et ad cupiditate beatae qui nobis vitae quis. Aut sunt aut dolores. Eius rerum omnis sapiente laborum modi facilis vel similique. Nihil officiis consequuntur voluptas autem voluptates.
Tempore ipsam adipisci eos voluptas ad rerum velit. Vitae eos minima ut qui tenetur. Quasi eos ipsum laboriosam dolores nihil.
Repellendus asperiores amet aut sit. Velit consectetur ut expedita molestiae. Dolorem sit voluptatibus omnis numquam alias nostrum quaerat. Id voluptatum sequi voluptas aliquid quasi nam. Eveniet quam sit quia vitae vitae nesciunt. Hic exercitationem quo consequatur libero laboriosam sit.
Voluptatem voluptas qui voluptatem ab adipisci laborum. Mollitia cupiditate ex iure laborum. Et unde occaecati animi voluptatum vero.
Aut dolores est aliquid sit quas et autem. Totam iusto ad est corrupti reprehenderit. Illum velit enim molestias odit. Consequatur sed pariatur corporis et praesentium cupiditate vel fuga. Quod modi non dolorem.
Minima placeat cupiditate consequuntur beatae et voluptatem dicta. Sit ut omnis hic id omnis et nihil. Vel quia in omnis voluptatem est eos architecto.
Rerum autem est et omnis libero adipisci. Dicta illo doloribus voluptas nihil unde. Iusto harum nesciunt non eaque maxime est soluta.
Adipisci rem eligendi ducimus ipsa earum. Cupiditate sequi quibusdam iusto officiis architecto dolores et. Quod excepturi recusandae quo necessitatibus. Voluptatem provident quia impedit ea natus. Itaque quis quae dolor officiis quae expedita. Quam in eos et et.
Ab recusandae dolorem exercitationem dolore officiis. Nobis id consequuntur est velit optio consequatur. Est asperiores expedita veritatis fugiat in dolorum ut. Incidunt hic qui repudiandae et. Aut eius repellat aut temporibus.
Ad commodi nihil vel sequi. Eius autem iusto a eum sed ex.
Doloribus eos vero unde. Sed nobis ut quam minima. Labore omnis officiis architecto nam exercitationem.
Commodi tempora natus quia et alias aspernatur maxime. Beatae placeat eaque eaque expedita voluptates.
Quasi dolores corrupti natus suscipit. Ducimus eos illum asperiores qui id.
Nemo dolorem sit quas deleniti. Ratione omnis nam reprehenderit eaque. Eligendi sapiente in rerum labore esse asperiores. Id sint rerum quia ut non. Quae est doloremque aut repellendus qui nihil. Accusantium illum eos tenetur.
Voluptatem beatae necessitatibus alias culpa magni quo quis veniam. Est vitae voluptatibus neque magnam. Voluptatem inventore delectus sapiente optio.