Name: Bill Schaffer
Company: Richard Vander Kaay & Associates
What is the ideal objective of private equity in the American economy?
There isn't any "ideal" objective of private equity. What makes private equity "ideal" is the fact private investors using their own money can invest as they see fit. Each private equity group develops its own preferences and as a result has its own identity/personality.
In private equity, the business plan has focus beyond the quarter-to-quarter mentality of public companies. Admittedly, private equity usually has an "exit" objective but it is always several years after investment. Management knows this is the objective and can focus on it in a proper fashion.
How is private equity designed to meet that objective?
Observers of private equity often pay lots of attention to firms buying companies in "difficult" circumstances and by providing leadership make the business prosper. However, I think equally important is the focus on successful "middle market" private companies that need "help" to grow or are owned by entrepreneurs who would like to exit/retire. Without private equity sponsorship many of these firms face a difficult future.
Please give specific examples of both how it has lived up to and failed to meet that objective.
The downside of a private equity investment for successful middle market companies is that they often "bring to the table" arrogant staff that has no proper experience in "management." Many successful owners of private middle market business learn too late that they have sold to "smarty pants" MBA's who don't understand how to manage anything other than their Excel spreadsheets! The distain of many private equity MBA's for the "blocking and tackling" in business is evident to those of us who have had experience with them.
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