“Greed is Good” , said Gordon Gekko in the 1987 classic “Wall Street” . Chances are that this line is still top of mind when the man on the street thinks of private equity . Private equity is very “public” now . Its time the industry does something to reposition itself .
Private equity has been hogging the headlines of late , whether it is the on-going deal frenzy or the “paying less income tax than your cleaner” controversy in the UK . One of the biggest private equity groups Blackstone has even gone public (how ironic , raise money publicly to take more companies private ) . If private equity was a brand , a bit of consumer research would reveal that the associations this brand evokes are ‘greed “, “barbarians at the gate ” , “asset strippers” , “fat cats” etc etc . Arguably Joe public is not the target audience for this brand , but even the sound bytes from the financial press are not entirely complimentary . Policy makers have started talking about the need to reign in the deal mania ( how and when is still not clear).
The arguments often touted in favor of private equity are :
1. More efficient capital allocation
2. No short-term window dressing for quarterly results, instead a focus on long term results
3. Managers are free to focus on business , free from activist investors ,”box -ticking” corporate governance , public scrutiny
If the private equity industry truly believes that what it is doing is actually good for the general public (due to greater corporate productivity and shareholder wealth creation) , then it ought to think about how its brand is perceived and positioned. If however deep down they know that the associations are true and they are in fact corporate vultures looking to “flip” assets to make a quick buck , then the brand has no long term future in any case (hopefully). Either way the “brand” owners need to take stock of the situation.