Private Equity Industry

The Private Equity Industry's Bad Reputation

Private equity is, by definition, a private industry that operates outside the traditional, public investment system. The huge impact that the private equity industry has on the financial market, and more recent high-profile buyouts have caused concern outside the industry and led calls for greater transparency in private equity. So why does private equity have such a bad reputation?

Key factors that contribute to private equity's bad reputation:

• Size: The relatively new development of private equity, specifically the buyouts of large companies, has caused much public concern because the private equity industry is less than transparent but private equity greatly effects financial markets.
• Media: Private equity enjoyed little attention from the media while private equity groups made smaller deals. Then, when the size of the deals increased and the impact of private equity was realized, the media struggled to define an industry that few really understood. Now, private equity firms are making an effort to work with the media and explain the private equity process.
  
• Public Interest: Private equity is a global industry so there is less involvement at the local level, and therefore a stigma is attached to private equity that it operates outside the public interest. Critics argue that private equity is exclusively motivated by capital and does not contribute locally. The substantial inflow of foreign capital to private equity funds does not help this image.
• Employment: There is a belief that when private equity firms takeover companies jobs are lost. A private equity firm may cease control of an underperforming company to help it realize its full profit potential. During the reorganization and restructuring some jobs are lost, but according to a recent study private equity firms often create more jobs, boosting employment.
  

For a database of more than 1,000 private equity firms and their contact details see our Private Equity Directory.

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