Private Equity's Bad Rap
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Here is a shocking idea – the SEIU is off base in its criticism of private equity. In fact, as noted in this piece, research shows that private equity groups are usually long-term investors who work hard to make companies healthy and expand employment.
Union groups have decided to target private equity firms because they feel there is political value in demonizing successful investors and furthering class warfare rhetoric. If you need to create a war then you also need to create an enemy, and private equity firms – who have traditionally shunned the limelight – make a convenient target.
However, the inconvenient truth is that these firms are often the very best kind of investors that a company can have. Their economic interests are closely aligned with the success of their companies, and they can take a long view that allows for short-term pain in exchange for long-term gain. There is no quarterly earnings guidance hoop-jumping. But what is most annoying to the unions is that private companies also have fewer exposed points of leverage for outsiders to exploit. Union pension funds can’t buy their stock, there are no securities filings to pore over for confidential information, and there is no ability for plaintiffs’ lawyers and unethical short sellers to drive securities class action litigation. These companies, in fact, have the freedom to be annoyingly focused on building their businesses.
We should be congratulating these firms and hoping that they again take their good companies public, rather than trying to paint them as bad guys.