It's Private Equity Abuse Week in Australia. The Financial Review (our WSJ) ran a two page spread entitled "How Lo Can Private Equity Go?" Not to be left out, the Sydney Morning Herald responded this morning with "Vultures Go Hungry."
I know I won't get any sympathy if I try and defend the PE industry. Let's face it, the prices paid and debt multiples on many of the large buyout transactions were utterly irresponsible.
But I do wish that the journalists could get some of the basic facts right. For example, they never distinguish between the irrational exuberance of the global buyout giants and the very different behaviour of the dozens of conservatively operated mid-market private equity firms.
Ingrid Mansell wrote this beauty in the Weekend AFR:
"Private equity firms typically buy underperforming companies, strip out costs, boost profitability and sell the assets after three to five years."
What a load of ignorant nonsense. Unless they're distressed asset specialists private equity firms almost never buy underperforming companies. In fact they spend millions of dollars in due diligence costs to ensure that the businesses they buy are performing strongly and will grow.
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