Thursday, January 2, 2014

Musings | Making the Pivot: What's Next for PE_Feeds in 2014

Hello everyone and happy new year to you all! I hope the end of 2013 finished with a bang and that 2014 is off to a good start.

I spent the last 6 months learning about the startup, brand, advertising, and VC worlds at this agency, and while 2014 is going to be an interesting year in all of those industries (as well as private equity), I decided to take another pivot onto #FeedsWrites and catalog everything I've been watching, reading, and sharing.

Thus, behold...

THE NEW #FeedsWrites:

  • #Startup_Feeds: A constantly-updating Flipboard Magazine which will hold all articles, info, and insight I find about the venture capital, startups, brand, advertising, mobile, and tech worlds. 
  • #PE_Feeds: Another constantly-updating Flipboard Magazine which will hold (and continue to hold) the most important pieces on private equity that I believe you should be reading.
  • #FeedsReads: An experiment that started last year, it's a curation of interesting and/or thought-provoking articles broken down by approximate length. You also can submit pieces to it!
  • Writing Catalog: I've created and updated an page that lists all of the pieces I have written as well as links to both Flipboard Magazines, #FeedsReads, and a few other surprises.
  • What Will Continue: I plan to put together more Leveraged Stories, Musings, Conference Notes, and Industry Thoughts along the way. 
Expect some more surprises especially coming from the Twitter feed. It's a new year and a new day (and a new dawn?) for PE_Feeds, and there's a lot of great work to be done ahead.

Feel free to leave me comments, and happy new year to all of you once again!

Monday, December 23, 2013

Musings | Thoughts on 2013, Private Equity, Startups, PE_Feeds, and the Future

When you start a new chapter in your career, you don't ever expect it to fully engulf all aspects of your life. I left the private equity world as my primary gig to come into the tech and startups world, joining an award-winning team of mobile web and native app developers at Gist Digital with a CTO responsible for part of the software in the iPhone and a CEO who brought and Webex to the entire Cisco Systems global network. Why did I move? Because it gave me an opportunity to move into a world that I had gotten a taste during my PE days:

The startup world.

I've always been fascinated by startups. Some are meant to truly help us and some, well, have other purposes. That said, It's so impressive to me to see such talented minds collaborate on revolutionary products that they believe can change the ways we interact in our daily lives for certain aspects. One of my dream jobs was to run my own healthcare-focused investment firm dedicated to seed rounds for startups (hence the main move to pursue a Biomedical Engineering degree), but the more that I got involved with startups across various industries, I became more and more curious about the applications many apps and startups could be used for, well, mankind in general.

The past 5 months have been a wild ride in my frying-pan-into-fire transition from the world of PE (a world that took me quite a while to wrap my hands around) to the startup world (which I continue to enjoy learning more about). I've talked to agencies, labs, accelerators, incubators, VC firms, multi-startup founders (both seasoned and new), tech/startup/agency journalists, and the like to suck in as much information as I can. To make matters even more murky, private equity shops started investing in some of the more successful startups like RebelMouse and Refinery29 this year!

That last point is part of my 2013 Takeaway List of things I've seen in both PE and startups that have piqued my interest. I've also seen some interesting transitions among the PE_Feeds Twitter account, both great and rough:

  1. A Hopeful Deal Future. This year was another big one for the world of add-on acquisitions for private equity firms. They heavily outweighed standalone deals and it's been pretty even in terms of secondary transactions (PE to PE) versus original transactions (acquiring the company from a strategic buyer, taking it private from public, or taking it from the family). Many companies will hit the 5-year holding period on 2015 and 2016 so we'll probably start seeing a winding down of add-on deals
  2. IPOMG. It's also been a heck of a year for IPOs for private equity-backed companies. While it's usually been a limited IPO window in the past, 2013 seemed to be the year the window was propped up with a thin (but stable) branch to allow some of the most prominent and successful IPOs happen this year.
  3. A Heavier Focus on Dividend Recaps, All Over. Dividend recapitalizations (taking out a debt investment to pay the original private equity owners, and then their investors, a dividend) is not the most ethically sound instrument, its main purpose (to help keep a company for a long-term plan while keeping investors happy returns-wise) is still sound. With the aforementioned 5-year holding period not too far away, expect more dividend recaps done in 2014; I actually expect PE shops to hit a record on dividends raised. Am I proud of this? Absolutely not.
  4. SEC Reg Tag. The House of Representatives is working to stop private equity firms over $150MM in investments to be registered with the SEC. The original deadline for them to be registered was earlier this year so while it's an interesting push, it's honestly unnecessary for two reasons:
    1. While paperwork filing will be frustrating at first for PE shops (and the losers here really are lower middle market shops where internal budgets are tighter than most), it will be consistent enough. PE firms have internally policed themselves and others for decades so when a firm steps out of line, other PE shops will think twice about co-investing with them as well as potentially selling them companies they own.
    2. From key pensions like the top funds in Canada to CalPERS and CalSTRS, Limited Partners (aka the key investors into private equity funds) took a heavier move towards both demanding for more information about investment processes and management fee charges as well as investing directly into companies. While some funds have some weird conflicts of interest (e.g., CPPIB's deal with KKR), expect this movement to continue. Canada's funds pay quite well so it's far from the end in terms of their direct investments.  
  5. A Push to Help The Manufacturing Economy. While we see a heavy focus towards the USA becoming more of a service-focused economy, there are still gleams of hope that our manufacturing prowess will return. Many industrial-focused companies are backed by private equity firms and it will continue to grow, so I truly believe that private equity has a moral obligation to help kickstart the US's manufacturing strengths. It's obviously a positive PR move for the industry, but the ethics need to outweigh it. 
  6. General Solicitation = Meh. The ban on general solicitation for private equity firms was lifted this year and while it's a powerful moment, it's not going to matter...on a public basis. There has been one hedge fund so far that has openly advertised but one point that I have consistently made about this lifted ban is that the SEC should focus on a consistent template that PE shops could use as their prospectus. You'll definitely see an under-the-radar movement towards private banking individuals and high-net-worth clients and what would be interesting to see is if family offices would get move into the movement as investors.
  1. Creativity Has No Bounds. Everybody hears about the Facebooks, Twitter, Tinders, Snapchats, and the like. That said, after going through countless Meetups, tech demos, and pitches, it is so comforting to me to hear some creative and innovative pitches from ambitious men and women. 
  2. Helping Others: The financial services industry has been a notoriously cold and tough world. While social media and branded content has helped the industry create a more human touch, coming to a more friendly, open environment in the startup world where aspiring entrepreneurs helped and continue to help each other in providing advice, resources, and information was quite an eye-opening experience for me. It's quite wonderful especially when you see people from all walks of life entering the startup world with big dreams and bright ideas.
  3. Tech Journalists and Valleywag. Making the transition to the startup/Silicon Valley world from private equity, you move from one journalist and coverage base to another, and it's been an interesting change. PE journalists and tech journalists are extremely different, and while I've integrated my reading from publications like AllThingsD, Techcrunch, and Mashable to MediaPost, Digiday, AdWeek, and AdAge,  one publication that really pointed out to me is Gawker Media's online platform known as Valleywag. Run by Sam Biddle and Nitasha Tiku, it's a variance of dives into the ethics issues of Silicon Valley and the startup world. Sam has focused on the general news and ethics violations while Nitasha has done more deep dives and takedowns that are fantastic reads. I've visited the site so much that it's becoming a solid bookmark in my browser and I openly wonder what would happen if/when there would be a Valleywag-style site for private equity. 
  1. Ethics and Social Media. There have been many publications online like BuzzFeed that have touched on ethically wrong posts on social media. The most prominent example of this is when the world learned about ex-IAC PR exec Justine Sacco. Whatever your position on her tweet, it was by far ethically wrong and disturbing. That said, it was equally disturbing to see some of the terrible and shocking responses that the general public wrote in light of her. From this to anonymous commenters on forums, when one is given more power to wield their thoughts from semi-protective curtains, it is scary on how far people will go to say hurtful things. Remember when many of our parents told us that if we don't have anything nice to say, don't say it? It seems that that sage advice has been thrown off the top of the Empire State Building. (We're all culpable for this terrible mistake, including myself.)   
  2. Reflections. It's been a great year in the world of PE_Feeds; I've met some very interesting people and have had the pleasure of some wonderfully talented and influential men and women follow me. That said, every single person who follows PE_Feeds is very special to me. What started as an experiment in 2010 has grown into something big that I never thought could happen. That said, it's been a rough time this year as I feel I lost the trust of several people who did help me get to where I was. I pissed off two important people to me who were great influences on PE_Feeds due to the mess behind Freedom Group (the gunmaker). I've also pissed off a few people due to some of my actions. I take these things very seriously and it's honestly tough to live with them. As Michael Richards said to Jerry Seinfeld when the topic of his nightclub mess came up, it broke me. When you build up a platform and you try to stay as professional and informational as possible, you want to take your mistakes seriously and to those who I have offended, I am truly sorry.
I know I've missed a lot of specific points; it's been tough to focus on both the private equity and startup worlds this year since they're two different places. That said, it has been a blast to listen to various people pitch great ideas to me and while I will continue to find ways to help them on a development standpoint, it would be great to help them further on an investment standpoint and take their ideas to the next level. 

Here's to 2014, everyone.

Friday, May 24, 2013

Musings | The Future

It's been a rough, long, deal-laden week, especially in my world of private equity. But I just wanted to take a few paragraphs to put down why I started all of this, why I started actually COVERING an industry which still the general public has had difficulty understanding. It is not their fault; it is the fault of all of us in the industry of not bridging the gap between the companies we deal with on a daily basis and the firms that own or owned them.

Yes, private equity journalists are dedicated to the insight, the numbers, the details. I have many friends within this area and I will continue to, because I respect and admire their work. But in June 2010, I took the task of trying to make it a little easier for the public to understand WHY private equity should matter to us. It was (and is) an unbiased way of following the money, pulling back the curtain to an industry that is still so archaic that it will take an NVCA-sized mountain to move it.

That said, I've been told to "shut up and drink my beer." I've been told nobody cares about this. I've even been told there are bigger people than me in the subject that people will listen to. And yet, those "people" who others refer to actually follow, respect, and support me. Dan Primack, arguably the most prominent in our business, showed his care and support at an event to me. It was one of the most powerful things to receive in my career. To get support from the othodox (Dan, PEHub, The Deal, DealBook, The WSJ, AltAssets, etc.) to the unorthodox (Michael Dell, Jim Breyer, Pat Kiernan) in terms of my industry coverage and attempts to try and explain such a complex industry to those who relate it to Mitt Romney, "vulture capitalism," and an evil genre in general. 

I've been in this industry for 5 years. I've seen private equity firms figuratively and literally tear companies to the ground and I've seen other firms rescue companies that we love from the dead. I've worked on projects where a colleague at a private equity-backed company would be gone the next week. I will continue to cover this industry, because even some of the most powerful people in it TOLD ME to keep doing what I'm doing.

I'll go back to my scotch and the new Daft Punk album now as I see my future, but I will leave you all with this quote from a great man who we all should learn from:

"Brick walls are there for a reason: they let us prove how badly we want things."

- Randy Pausch

Saturday, March 30, 2013

Musings | School Shootings and the Gun Debate: How the Issue Is Deeper Than "Mentally Ill"

This morning I read a powerful piece in the NYT Magazine about Jay Caspian Kang's conversation with One L. Goh, who killed 6 people and wounded 3 others in Oakland on 4/2/12 before surrendering to the police. It's a very telling and scary story, not just because of the recounting I the gruesome events, but because of Goh's background.
While the story focuses on being Korean in America, it raises a deeper issue, an issue that has unfortunately become more trivial during this whole gun debate: what it means to be "mentally ill."

There is no question that there are many mentally unstable men, women, and children who need to be helped and are in need of support. But what is more worrisome is how both the NRA's Wayne LaPierre and the media are treating these unfortunate souls as a category. It goes deeper than that because there are countless people like Goh who are relatively mentally healthy people who are dealing with so many issues and are quietly crying out for help.

The worst part is, these men and women are unable to find the necessary support systems, whether it's because they don't know where to turn or they are scared that turning to help is a symbol of weakness. In a society where sensationalism, peer pressure, and a desire to fit in has overtaken daily life, any sign of weakness is trampled.

We all have a duty to keep our eyes open. We all have a duty as human beings to see if people we know (and even those we don't) are struggling. We have a duty to show them they won't be judged by working towards finding ways to become happy again.

We can't put them in a category. It only makes it worse.

Wednesday, March 6, 2013

#FeedsReads | What I'm Reading (Part I)

From time to time on the Twitter account, I'll tweet out some articles or pieces I'm reading regardless of their relation to private equity. I started tagging those tweets with the hashtag "#FeedsReads." Since we have this blog going, I'll share with you a post every now and then with about 5 or so articles I think you all would enjoy reading.

So, here they are: The first edition of the #FeedsReads posts!

  1. NEW YORK TIMES: A heartbreaking story of Josh Miele, whose face was damaged by acid as a child but rose up to the happiest ending one could have.
  2. CONSERVATION MAGAZINE: How stovemakers are trying to build the perfect wooden stove to help Third World countries and to combat climate change.
  3. SALON: WWE legend Jake "The Snake" Roberts, his recovery from addiction, and his comeback to the ring. 
  4. THE WASHINGTON POST: How cycling phenom Joe Dombrowski is leading the way towards cycling's future, marred in the scandal that is Lance Armstrong.
  5. QUARTZ: How ethicist William MacAskill believes working on Wall Street in your initial career will do more good (because you'll make more money to be able to fund good-doing).
  6. THE ATLANTIC: Ashley Fetters on the 15-year anniversary of the cult classic The Big Lebowski and how its laid-back world still abides, dude.
  7. THE ATLANTIC: A powerful piece (and the source for my cyber-bullying trolling post) about the modern age of combating cyber-bullying. 
Let me know what you guys think of the pieces in the Comments section. 

- PE Feeds

Friday, March 1, 2013

Musings | The Sickness That Is Trolling: How Jabs To One Are Slaps To Others

I'll just go ahead and say it: I was bullied a few times when I was younger.

I was poked at for my scrawny size, my inferiority complex, and worst of all, for my religion. Growing up in a mostly-white suburb, there was one day when our world history classes taught us about it (Jainism) and my fellow classmates subsequently learned that I was Jain. While I was proud that they were learning about the history of Jainism, many of the guys instead thought it would be funny to call me "Diaper Boy" as their way of understanding some of the tenets of the Jainism. With sentences like "So what, you don't kick rocks?" and "Why aren't you wearing your diaper today?" coming up, it hurt. Hard. I somehow was able to laugh it off then, but it still scars me to this day of the ignorance of those guys.

In this day in age, the worst kind of bullying is coming up on social media. I've been going through this Atlantic piece about the modern ways we are tackling cyber bullying, and what scares me the most is that even as people I know get older, their ignorance and sense of self-ethics never changes.

"Trolling," a quasi-bullying tactic I have been seeing way too often on Twitter, is getting a bit out of hand these days. From "subtweets" (tweets specifically referring to someone or a set of people without directly mentioning them) to direct attacks, I see so many snarky comments and jabs that while the jabber may think is funny and lighthearted, the jabbed may take it more as a heavy backhanded slap. It's not right and it makes that person look more of a fool than he or she already is.

What is even scarier to me is that some of these jabbers are well-respected people within their fields of work. I have seen journalists unfairly blow up on others (including myself). I have seen social media strategists/editors/directors/etc use some pointed language to take down the viewpoints of people, even if they are just expressing their opinions. I've even seen publications retweet tweets of others because they did a simple search on Twitter in order to publicly shame them. Really? Are we adults or are we still children?

I know it is unfair to point fingers like I am above, but what is scarier to me is who is to blame: all of us. Let's face it, we all have laughed at one of these actions. We all have seen them happen. But we don't ever do enough to stop it or even police it. I am at fault, and so are many of us.

The song from Avenue Q is sadly correct: Everyone's a little bit racist. But as grown adults, we have the ability to both stop ourselves from causing these disturbing jabs and to put a stop to others doing it by calling them out. The Atlantic's piece points on how the idea of a "self-reflection" box could come up before one posts anything due to algorithms, and that's a great and hopeful step. But if we cannot control ourselves from doling out these backhanded insults, then we all need a lesson in maturity.
We have seen individuals take action themselves. John Herrman took down ComfortablySmug, and Ryan Broderick has taken on some seriously scary 4Chan posters during the "Cutting4Bieber" mess. It takes balls to take action, and they both did great work. Guys, if you're reading this, thank you.

All I ask of each and every one of you (and even myself) is this: before you post, write, tweet, or say anything, take the extra few seconds and think: could this hurt someone? If it does, then hold back. Your psyche will thank you later.

PS: Also, if you've never visited it before, check out PostSecret. You will find some of the most powerful inner thoughts of people around you, and sometimes you'll even feel you'll connect with them.

Wednesday, February 27, 2013

Industry Thoughts | Private Equity's "Doughnut Hole" Is More Like A Steak Bait

Yesterday afternoon, Fortune's Dan Primack put together a piece on some of his observations during the SuperReturn International Conference in Berlin. It was an understandable tongue-lashing at the industry on how private equity investors and execs truly believe the leveraged prices are too high and yet are not calling for a pull back. Dan's line at the end sums up his piece perfectly:

To be clear, I'm not arguing that we're about to have another rash of TXU's on our hands. But that's due more to capital constraints than it is to changed attitudes or behaviors. What I am saying is that private equity investors are aware of a disconnect between their head and their heart. And they don't plan to do anything about it.

Dan is right in that PE execs are not openly calling for a pullback. This IS SuperReturn after all, where it's one of the major PE conferences designed to feature key speakers. Whether the Q&A session was more strict on getting answers or not is something to be seen, but we will have to rely on Dan's and Cristina Alesci (who Dan saw grabbing an interview right before he did - early BloomBird gets the worm, I guess) for the deep interviews at this point.
(UPDATE: Cristina responded to Dan's tweet in the most perfect way.)

While these execs aren't openly calling for the pullback, they are DEFINITELY saying it in private. In my many talks over the past few weeks with middle market, mega-size, and lower-market PE shops, many execs have told me that they are finally seeing deals pick up (everyone was in a rush to close deals at the end of December because of tax reasons) but the cheap debt is making everyone think twice. 

This is why I compare the doughnut analogy that Dan used to more like a "steak bait." 
(DISCLAIMER: I was hungry when I came up with this analogy.)

Private equity's investors (limited partners) have the upper hand again in this day in age of the private equity industry, and while there is cheap debt and financing out there, the equity dollars are still seriously crushed by the terms, conditions, and extra debt being loaned by the banks. It's like the banks drop out a big juicy Peter Luger porterhouse steak with a very strong hook and fishing line attached to it. You grab it, be prepared for a rough ride. As Dan put it in his post...

As one senior PE investor explained it to me: "You might get excited that someone is willing to put $1 billion of debt next to your single dollar, but remember that your bill is now sitting beneath one billion or them."

There is a heavy sense of trepidation among PE firms I've talked with in terms of deals with all the available financing out there; that is why you'll see much more structured, smart deals that will come out within at least the next 2 quarters. I will say this though: if I'm wrong, I'll go eat a paper steak, Dan.

- PE Feeds

Tuesday, February 26, 2013

Leveraged Stories | TSG Consumer Partners and Stumptown Coffee Roasters

Here's a nice and short private equity story: TSG Consumer Partners, one of the most well-respected consumer-focused PE firms (they helped grow companies like Vitaminwater and Smart Balance and currently own pretty well-known companies like Rebecca Minkoff, Pop Chips, Muscle Milk/Cytosport, and e.l.f. Cosmetics), bought a majority stake in Portland-based gourmet coffee company Stumptown Coffee Roasters back in May/June 2011 (announcement/closing). 
TSG was actually looking to expand within the gourmet coffee area, and from my talks with people in the firm, they've been looking at many specialty consumer sectors to work on.

It was reported in the New York Times that TSG had picked up a 90% stake in Stumptown with the "goal" of selling it to a larger company down the road. Now, knowing how the firm works, they would only sell to a larger company if the brand reputation their portfolio company (Stumptown in this case) was kept solid and not destroyed. 
(Also, I'm not surprised La Colombe Torrefaction, one of Stumptown's competitors, said this, as its founder Todd Carmichael wrote a scathing piece in Esquire's "Eat Like a Man" blog in May 2011, basically saying Stumptown sold out "to Wall Street." Stumptown's founder Duane Sorenson wrote a note shortly afterwards on the company website, and even TSG's head Alex Panos said that Duane is still calling the shots.)

However, it is definitely worth nothing TSG has done many short-term deals in the past with the goal of helping the companies it owns build its brand. The Portland Business Journal looked at the 2003 acquisition of Harry's Fresh Foods for example. The same article also mentioned that (and this is true) TSG execs even walk along store aisles for investment opportunities!

That same NYT article had mentioned that TSG talked with California-based coffee company Blue Bottle Coffee:

“If you want to grow your business you have to do it somehow, and if you can’t get a loan, you have to sell equity, unless you have a really, really well-off grandpa,” said James Freeman, the owner of Blue Bottle Coffee in Oakland, Calif. He said he’d met with two representatives from TSG in March, but would not say what they discussed.
The bigger story about TSG's acquisition is its plan for selective expansion. They opened two new shows in Brooklyn and added a bottling facility to expand the production of its cold brew coffee. 
Finally, Willamette Week put together a really good breakdown of TSG's desire to go into gourmet coffee. The quote on the social  media "backlash" is pretty funny:

The Internet was rife with conjecture: Stumptown was looking to break into Europe. Stumptown was broke. Stumptown had been bought by McDonald’s. “Did Stumptown just get sold to Vitamin Water? Maybe it’s time to switch to Clive [a small Portland roaster],” Decemberists frontman Colin Meloy tweeted.

So far, it looks like TSG is doing well with Stumptown. Sorenson is still running the show, and they're looking to expand into the right cities. A handful of PE firms are as successful as TSG in building up brands, and that will be one of the key futures of private equity.

Saturday, February 23, 2013

Industry Thoughts | Public-ifying PE (an update)

Yes, it's been a while since this blog has been updated. I greatly apologize for this, but please know it was not on purpose. I've been spending a lot of time utilizing Twitter to write my thoughts (albeit to the 140 character limit), and I know my feed has been a bit off topic recently. So I thought I'd do a little update and share what is going to happen on this blog moving forward.

While the Private Equity Growth Capital Council and ACG have been been doing good jobs on sharing some stories about private equity success stories, I am going to write about some others I've been seeing, both on the success and failure sides. The bigger story I will aim to tell is more like a forensics report, digging as deep as I can to show what went right (or wrong). More importantly, it will focus on companies people will recognize well (from Dave & Buster's to the makers of the Slinky toy), with the goal of showing how much work behind the curtain PE is doing. The curtain is slowly getting pulled back by various people. I intend to rip it down.

From the SEC registration to public enforcement, private equity will be under a larger magnifying glass moving forward. I plan to keep track of what happens and keep you guys and gals updated. While it's more paperwork for PE firms (and the majority of firms work within the law), it's better for its public image as it continues to be a work in progress.

Along with telling some PE success and failure stories, I'll pen a short post or two about a company that's well known among the general public that's, well, PE-backed. From Rebecca Minkoff to Rosa Mexicano, you never know what company I'll touch next.

While I'll definitely be tweeting during the many PE conferences I attend, expect some takeaway posts at the end of them. Intergrowth 2013 (the largest private equity conference in the world) is coming up in April, so expect some posts then.

I read and see a lot of private equity pieces. I'll share some of what I'm reading and give my take and/or responses to them. It could be data-centered or insight-centered. Heck, I'll throw in a snarky piece every now and then. Those will be fun.

Every now and then you'll see a non-private equity piece here. It may center around something fun (sports, animals, WWE - yes, it's my guilty pleasure) or something thought-provoking (personal thoughts, ideas, etc.). I promise they'll be worth the read.

Team PE Feeds has garnered a bigger following than I ever would have imagined. I cannot thank you all enough and plan to up my game and share with you a deeper insight about PE to those who may have never been able to understand it.
There are many great private equity journalists dedicated to the data and insight, but nobody has consistently helped educate the public, which is totally fine. Many of them (Jason Kelly with his book The New Tycoons, for example) have done great jobs when they have. But their jobs can't allow them to do it full time.
That's where I come in.

Enjoy the leveraged ride.

- PE Feeds

Monday, April 30, 2012

Industry Thoughts | One-ish Year Update

July 2011. Yikes. That was the last time I wrote in here. First off, sorry guys for the lack in posts. Right when I had promised a return to consistency, work gets crazy and the PE industry gets gut check after gut check by the media, Democrats, and the general public. 
But let's take a look at some key stories that happened the past 3 quarters...

THE ANTI-PE GUT CHECKS: From one jab to another hook, the industry faced an ONSLAUGHT of acrimonious words from the mainstream media and American public, getting terms like "vulture capitalists," "job killers," and executives that are basically, to put it bluntly, fornicating acquired companies to cut costs, "strip and flip" them, and sell at a profit, leaving the workers to fend for themselves. Hmmm, how wrong is this picture here? Maybe Dan Primack's "wicked smaht" friend can show you.
So, what's been the response to the gut checks: the PEGCC released a site, Private Equity At Work, that touches the postive effects that larger PE firms have been making. Moreover, ACG had two sides, the Middle Market Private Capital Leadership Forum and a recently released PE education piece focused on the middle market (which is really becoming PE's future). You also had many journalists attempting to educate their readers about private equity, how it works, and the pros and cons of it.
That's great and all, but the problem here is that we can get countless economists, execs, and portfolio company workers to provide useful information to educate, but it takes 1 Jon Stewart segment, or 1 "debate" on NewsHour (where the journalist who will not be named here basically tries to take over the program), or 1 angry anti-PE tirade to turn the public (which, by the way, is in a phase of "Generation Pissed Off" and would be happy to find a way to skewer the financial services industry) more towards anti-PE.
It won't matter about the Stewart Weitzmans they're buying, the Huddle Houses they're eating at, or the countless industrial companies that provide things from power to 3D technology through Real3D, the anti-PE battle will continue on until one prominent and influential source can step up and explain what the industry is REALLY doing.
We need less Josh Kosmans and more David Snows.

PERFORMANCE IS KING: From strategic buyers still remaining a constant threat to higher multiples along with LPs clamping down on terms and conditions, the future of PE (the mid- and lower-mid-markets) is working to stay innovative on deal flow and operational improvements. Why? Because they need to show the pure performance off to their investors.
LPs are pushing PE to hire more Operating Partners (or people who understand operations and strategy improvements more, the LEKs, Gotham Consulting Partners, Parthenons, and 3rd party firms of the land) to handle day-to-day operations. PE is also taking a personal initiative to be more conservative and smart in their investments. Moreover, with the middle market and lower middle market divisions making more deals (Pitchbook determined that 3 out of 5 deals in the past decade were middle market-focused), we should still continue to see more careful deal flow coming out of the industry (albeit with higher multiples thanks to some overpaying that no doubt will happen from firms flush with cash/dry powder and a need to use it soon before terms run out).
Then we have survival of the fittest. Time is running out for many firms to use up capital and deliver strong IRRs. While some firms are able to snap up capital for new funds in a matter of weeks (some even getting it within 10 weeks!), others will struggle and get tens or hundreds of millions of dollars lower than what they expect. Does this stink? Of course it does, especially as LPs apparently have $1/4 trillion to spend on PE but hold it back.
When the future of PE is securely mid-market, expect the faucets to open up again. We're partly seeing that right now.

OPTIMISM: I don't think I've seen any other industry within financial services that has more optimistic dealmakers than PE. I recently returned from ACG InterGrowth 2012 and caught up with a lot of my colleagues in the industry. The two big things I got from everyone were:

  • We are BUSY with deals and books to read through, and
  • We may not be as busy as we like, but things are really starting to pick up.

Even with the doom and gloom of media pieces being put out there, PE is looking up and towards the sky. Heck, even PE is hiring again!

I am not worried about the industry moving forward into the election this November, even with the gut checks here and there. Besides, one happy middle market PE firm that I know quite well, Monomoy Capital Partners, is getting some fun time in the press, though Bloomberg Businessweek almost made the entire a boneheaded decision with its choice of cover. (Really, guys??) What BB is not hammering on though is that WHAT THEY ARE DOING IS NOT AN OUTLIER. Where is Jay Jordan, Riverside's Pam Hendrickson, or heck even CARLYLE when you need them for backup?

You also have to remember that Obama has been pushing the Small Business Investment Company (SBIC) program, also trying to make the head a Cabinet position, and lots of mid-market firms are applying for funds within it with the focus to help small businesses. That also explains the subdued attack by the Obama campaign on PE; their target isn't the industry, it's Bain Capital. (Also, you can't forget Obama's strong relationships to key PE execs, one publicized one being Blackstone's Tony James.)

I briefly touched three key drivers of PE's evolution through the past 12-ish months. I also have that optimism shared among execs, as the industry gets more out in the open through SEC registrations, the JOBS Act, and a growing desire among GPs to share information about funds to investors and even the public. Private equity is coming out of its off-the-radar style and slowly rolling out into the sun. When it finally becomes entirely exposed for all to see, we all will know how actually useful and beneficial it is for our economy and businesses small and large.