A Quote by Thomas G. Stemberg
The role of private equity as fiduciaries is certainly to make money.
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We really wake up every day trying to build businesses. That is the goal of private equity. It's a misnomer out there that private equity profits by shrinking companies. In fact, it's just the opposite. Private equity creates value by growing great companies.
Many LBOs are man-made disasters. When the price paid is excessive, the equity portion of an LBO is really an out-of-the-money call option. Many fiduciaries placed large amounts of the capital under their stewardship into such options in 2006 and 2007.
If private-equity firms are as good at remaking companies as they claim, they don't need tax loopholes to make money.
Private equity has absolutely no reason to exist. The private equity holder has all the upside and the banks all the downside.
Private equity firms aren't necessarily evil by definition. There are many stories of successful turnarounds fueled by private equity, often involving multiple floundering businesses that are rolled into a single entity, eliminating duplicative overhead.
Private equity does pay very well, and my counterparts, guys that I grew up with who are still working at a number of firms, all make a lot of money.
I've probably done more venture capital deals and expansion financings than I have done private equity deals. But both are the same. Private equity companies have also built jobs.
The private equity world is a relatively small one. There are currently probably a few thousand professional jobs worldwide. In private equity, that's probably about all there is. So in the scheme of things, the firms are all relatively small.
It's quite astonishing how much money people make in the hedge fund business and in the private equity field, and how well-off affluent families really are.
If you have money draining out of the public equity markets, that inevitably affects the private equity market. They cannot exist going in different directions because somehow that will rent the fabric of the universe. It's just not permitted that that happens. Obviously there can be anomalies for brief periods of time but it just can't happen forever.
Hedge funds, private equity and venture capital funds have played an important role in providing liquidity to our financial system and improving the efficiency of capital markets. But as their role has grown, so have the risks they pose.
When I was a CEO, I thought I understood private equity. I didn't. And what I've learned since my retirement, and since becoming directly involved in the world of private equity, points the way to a new career path for thousands of talented senior executives - and a new engine for value creation.
I'm struck by the fact that by and large equity capital doesn't play a big role in new financing; it's either bonds or internal financing but not really equity. And therefore, it's not clear that anything which improves the equity markets has really much to do with the productivity of the economy as a whole.
Most of India's 300 odd news channels are making losses and are dependent on dubious cross holding, black money and dodgy private equity investors, both foreign and Indian.
Let's face it, we're skunk drunk and it's because of money. It's almost like we all need to enter Betty Ford Clinic 2.0 together. This time, it's not stock market money but private equity, M&A, VCs and to some degree the reckless abandonment of logic by some advertisers who are perpetuating what is sure to end badly when the economy turns. Hubris is back my friends.
Being a good private equity investor is more complicated than it seems. I would say that there are a few characteristics that are important. If you look at the skill set that you need to ultimately be a successful private equity investor, at least at the senior level, you have to be, in this business, a good investor. You have to be able to help companies perform and you have to have judgment around exiting investments. If you look at the skill sets there, they include some things you can teach and some that you can't.
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