Sunday, December 18, 2016

Forbes Columnist Predicts PEU Double Under Trump

Forbes Antoine Gara believes private equity underwriters could become much richer under President elect Donald Trump's tax reform initiative. 

Trump's talk of killing the private equity industry's carried interest tax deduction has generated major headlines, but if it comes with broader tax reform it could create the biggest opportunity for the industry since firms like Apollo, Blackstone, Carlyle and KKR listed their shares on public stock markets. Lowering corporate and individual tax rates could give private equity firms reason to convert from tax-avoiding pass through partnerships into ordinary corporations, opening up their shares to a far broader investor base.
Massive profits from disruption is the PEU way.  It's government's job to set the tea leaves for Leon Black, Stephen Schwarzman, David Rubenstein and Henry Kravis to read.

Such a move could unwind a chronic discount attached to private equity stocks despite their master of the universe pedigree. Eventually, it could double the wealth of the industry’s billionaire class.
That's the billionaire class that has done very well the last few decades no matter the political party in power.

The Carlyle Group just inked a deal for Revolution Studios.  The public may need to be swayed as to the patriotic value of the greed/leverage boys.   The heroes journey could be a corporate flip at 7x equity investment.  It may swell wallets but likely not hearts. 

American movies during WWII promoted the need to dismantle an enemy that allowed so much wealth and power to be concentrated in the hands of axis governments and their wealthy industrialist supporters. 

Time will reveal what comes out of Carlyle's Revolution Studios and the Trump administration but the prospect of billionaire's doubling their already obscene wealth is not appealing.