Wednesday, February 6, 2008

Global Coordination for PEU Boys

A Global Buyout Committee consisting of private equity leaders will meet to establish common ground for the industry, the London-based Times reported. This is the first time the heads of Europe's major private equity firms have come together since they were the object of criticism by unions and politicians last summer, the newspaper said.

The committee aims to promote a coordinated message, the Times said, citing Robert Easton, managing partner of Carlyle Group Inc, who will chair the group. Here's my verison of what the modern day money changers should say:

1) They buy mostly companies in growth industries, thus they will claim credit for corresponding job growth. The fact that much of their growth comes from expanded government business should be ignored.

2) Their six figure and higher paid managers deserve their low tax rates on carried interest, because of the aforementioned job growth. It's sort of a national economic development, tax rebate scheme. While their firms get large chunks of revenue from the government, managers paying taxes to that same entity is very bad.

3) They pretend to care more about treating customers fairly than that 25% annual return target. Carlyle has a history of failing hospital patients in a time of crisis and blaming everyone else for their failures.

4) There's another group, sovereign wealth funds, even more private and secretive than private equity underwriters (PEU's). So please focus on the sovereigns, not on private equity.

5) Funny, those Western capitalistic private equity firms are being bailed out by those same sovereign government controlled corporations. What happened to all those advantages of being private? Why would the much better model need to be helped by the clearly inferior government firms?

6) Their employment of huge numbers of ex-government officials is just a coincidence. Pay no attention to those former high ups driving federal business to their numerous PEU affiliates.

7) If PEU managers are taxed at a greater rate, that would hurt their trickle down spending currently keeping the world economies afloat.

8) Any country is lucky to have private equity firms. Treat them badly and they'll take their funds and companies elsewhere.

It looks like countries need a global response to such firms and their coordinated messages. Only by sticking together, can countries not be pitted against each other and picked off. It's time to call them out, and call their bluff. It's a shame America lacks the leadership to do so.