Is private equity so bad?
Am I a dirty capitalist if I think that private equity is not ‘that bad’, or just naïve? My ex-boyfriend works in private equity, which alone should be enough to turn me off of it. I wouldn’t go as far as to say that I am a full supporter of it, but I am not its worst critic either.
Before I met my ex-boyfriend, let’s call him Joe, all I knew about private equity was that it sounded ‘kind of cool’ and that every junior investment banker I knew, wanted in. Joe often explained his work and I would pretend to listen. Surprisingly, I managed to learn a few things.
An article in last week’s New Statesman, describes private equity as “capitalism’s dirty business”. Private equity is, basically, a group of investors who buy underperforming companies. After a few years, they sell them, hopefully, for a profit. According to the New Statesman, private equity “sacks staff, cuts wages, sells off assets, outsources, screws suppliers and, more often than not, reduces services to customers” in order to make their profit.
Supporters of private equity will of course argue that their expertise is in managing and developing the weaknesses of a company. I half believe this, because it is not in the best interest of private equity firms to screw a company over. They make better returns by ‘refurbishing’ the company and selling it for more.
Believe it or not, the public can benefit from private equity.
Pension companies are big investors in private equity and some of the profits actually go back to its pensioners. Private equity can also create jobs once better, more efficient business models are up and running.
If the job can be done by one, why would you hire five? If it can be done in half the time for half the price, why wouldn’t you? Oh dear. I’m afraid I am a dirty capitalist. It is thoughts like these that upset labour unions and keep sweatshops in production.
Before I met my ex-boyfriend, let’s call him Joe, all I knew about private equity was that it sounded ‘kind of cool’ and that every junior investment banker I knew, wanted in. Joe often explained his work and I would pretend to listen. Surprisingly, I managed to learn a few things.
An article in last week’s New Statesman, describes private equity as “capitalism’s dirty business”. Private equity is, basically, a group of investors who buy underperforming companies. After a few years, they sell them, hopefully, for a profit. According to the New Statesman, private equity “sacks staff, cuts wages, sells off assets, outsources, screws suppliers and, more often than not, reduces services to customers” in order to make their profit.
Supporters of private equity will of course argue that their expertise is in managing and developing the weaknesses of a company. I half believe this, because it is not in the best interest of private equity firms to screw a company over. They make better returns by ‘refurbishing’ the company and selling it for more.
Believe it or not, the public can benefit from private equity.
Pension companies are big investors in private equity and some of the profits actually go back to its pensioners. Private equity can also create jobs once better, more efficient business models are up and running.
If the job can be done by one, why would you hire five? If it can be done in half the time for half the price, why wouldn’t you? Oh dear. I’m afraid I am a dirty capitalist. It is thoughts like these that upset labour unions and keep sweatshops in production.
posted by vip at 5:00 AM
0 Comments:
Post a Comment
<< Home