Private equity: Scrooge no longer

When it comes to philanthropy, the barons of the U.S. buyout business could take a page from counterparts overseas.

By Grace Wong, staff writer

LONDON ( -- Private equity firms have a reputation for being rich and ruthless - and for good reason.

They've been swooping in and buying public companies at a mind-numbing pace, loading them up with debt and reaping billions from their investments. In the first half of the year alone, private equity firms announced $644 billion worth of deals, up 95.1 percent from last year, accounting for nearly a quarter of all merger activity worldwide, according to Thomson Financial. (And some contend the managers enjoy a big tax break on their income.)

At the same time, they've been giving back - private equity partners, through their firms or via individual contributions, are known for being generous donors to charity. But often, those who have made their fortunes from the buyout boom shun the spotlight and give quietly and privately, as many wealthy individuals choose to do.

"Private equity firms are very concerned about making any statements. They are being very circumspect," said Stephen Adler, chief executive of Charity Brands Marketing, a New York firm that advises private equity firms and hedge funds on giving. "They're all about being under the radar."

A group of private equity firms in Europe, however, is changing that approach by attaching a public face to the industry's philanthropic work.

Some of Europe's biggest buyout houses, including British firms CVC Capital Partners and Apax Partners, last year launched the Private Equity Foundation, a London-based charity for children.

The mission of the foundation includes making private equity a "force for good," according to Shaks Gosh, the foundation's chief executive and an established leader in Britain's charity community.

"It's about responsibility, getting private equity firms to not only donate money but also bring their time, business support and strategic skills to charities. This is more than just writing a check," she said.

U.S. buyout firms might benefit from following such a strategy. The money behind the U.S. buyout boom has been as tight-lipped about its philanthropy as it is on some of its deals.

That hasn't helped private equity's image in the States, where a chorus of criticism from all directions is only growing louder.

"There hasn't been a lot mentioned about their [charity] work so the public hasn't really gained any keen appreciation for the impact coming from the industry," said James Post, a professor at Boston University School of Management.

It seems like most buyout firms prefer to keep it that way.

For one, private equity firms don't want their philanthropy work to have a high profile because then they'll be inundated with requests, Adler said.

Furthermore, resentment of the industry runs so deep that critics have even taken swipes at private equity's good works.

Blackstone Group (Charts) - the reigning buyout champ on Wall Street - said when it filed to go public that it would set aside $150 million for The Blackstone Charitable Foundation.

Some critics were quick to note that was dwarfed by the billions founders Steve Schwarzman and Pete Peterson made from the company's initial public offering last month - mere crumbs for the community at large.

Blackstone did not return calls seeking comment.

The industry has been "demonized in the political sense," said Post, and there's little it can do now to win the public's trust.

But following in the footsteps of their European counterparts would offer one way for the buyout kings of Wall Street to burnish their image - something that has taken on more importance as the industry moves into the limelight.

To be sure, a charitable vehicle alone isn't going to lessen the heat on private equity. In Europe, the bosses of the buyout world have been on the hot seat for not disclosing enough about their dealings and for what some view to be favorable tax treatment.

And some critics say the Private Equity Foundation, which has given out about £5 million ($10 million) in grants, isn't being generous enough. Other big money players like London-based hedge fund The Children's Investment Fund sets aside a cut of its management fees and profits for charity, these critics say.

But by pooling resources and putting the Private Equity Foundation in the hands of a well-respected charity executive, the buyout firms are moving to create a more credible public face.

"The [Private Equity Foundation] is meant to be very public," said Gosh. "It's about changing society and engaging the private equity business world in that change."

That shows the public what the European buyout industry is giving back to the community - something its counterparts across the Atlantic have failed to do so far. Top of page