The PE-backed exec
Name: John Waltko
Company: Quorum Health Resources

What is the ideal objective of private equity in the American economy?

Private equity is a way for companies to access working capital for purposes of growing value.

How is private equity designed to meet that objective?

Instead of buying stocks on the NYSE or buying bonds, private equity firms buy companies and then put in place management teams that increase value by improving the company and/or expand its distribution and sales. When successful, they have huge returns. When they fail, well, the private equity group loses their investment. I will plead ignorance on the dividend recaps.

Please give examples of both how it has lived up to and failed to meet that objective?

The company I work for was spun off from a public company. We originally financed the company via private equity and employee equity investment. It was touch and go for a number of years, but we turned the corner and became very successful and made large amounts of money for the PE firm and the investing employees when we went public. We grew. The PE firm moved on after selling stock in our company.

@FortuneMagazine - Last updated January 19 2012: 4:48 PM ET
Join the Conversation

Newt GingrichGingrich earned hundreds of thousands of dollars from private equity.