You needn't be a Democrat to appreciate Saturday Night Live's recent spoof on an anti-Romney attack ad, skewering the GOP nominee's affiliation with private equity. Kenan Thompson is downsized over and over as Mitt Romney and Bain Capital acquire his employers-first the textile mill, then the piano factory, then the trucking company. Our hapless everyman realizes he's a target when he can't even hold onto his part-time job at an Orange Julius stand, because Romney and his firm have bought that, too-"not the whole company, mind you-just this particular franchise," deadpans Thompson.
Thanks to the 2012 presidential race, the number of Americans familiar with the term "private equity" is higher than perhaps at any other time in history. And their reactions to this slick-sounding business usually range between outrage and disgust.
There's a lot of misinformation out there about what private equity is. There's also a strong desire to assign blame for what bothers us about corporate America-the closing of factories, the casualness with which employees (or sometimes whole towns) can have the rug pulled out from under them in the name of cost cuts, the decline in the civic pride that old-line corporations once engendered in this country. Private equity, with its attraction to distress, its emphasis on returns and its apparent disinterest in nostalgia, is a convenient villain here. But it certainly isn't the only one.
The steel industry, the first sector I covered as a financial journalist, has a long history of drawn-out strikes, painful plant closures and other tough scenarios worthy of a Springsteen tune or two-and all of that started long before Wilbur Ross began funneling private equity money into the sector.
Down in Texas, where I covered local companies, I watched large corporations slink away from longstanding civic commitments that had bound these businesses to their hometowns for decades. There were no shadowy figures pulling the puppet strings from their private equity offices in New York. These were once-proud public companies that had fallen upon hard times, and the decision to pull back was made locally, by executives and board members who talked as big a game about shareholder value as anyone in the private equity sphere.
My own employers have ranged from benevolent billionaires to public companies to, yes, private equity investors. I've noticed little difference in the day to day, and that's because like most people, my experience at work is shaped more by the people around me than by ownership groups many layers above me. And pretty much wherever you go, newsrooms are newsrooms. The ownership structure may differ, but the mix of egos and neuroses, and the general sense of camaraderie, are usually similar.
In each place I've worked, I've witnessed beautiful gestures-the support offered to colleagues who have fallen ill or have suffered the loss of a spouse, for example-but I've also seen regrettable behavior, by the screamers who manage people by bullying them, and in layoffs executed in grossly insensitive fashion.
In the end, a company is little more than a collection of people. But unlike people, companies don't have feelings. They have a profit motive, whether they are owned by private equity or anyone else. As a fervent capitalist, I respect that.
Private equity does take a fairly unique approach to money-making, though, and it's worth exploring how these investors are impacting the bank industry. And if you didn't think they were impacting the industry, our cover story this month just might make you think otherwise. Enjoy.
Editor in Chief