Monday, March 21, 2011

Industry Thoughts | ACG And Lobbying, Part IV (A response to David's response)

After a lot of responses (including my own) over his recent article in PEHub, David Toll, the Editor-in-Charge at Buyouts, made a response of his own:

Thanks for joining the debate everyone, and all the thoughtful responses. I know that many portfolio companies grow, and sometimes rapidly, under PE ownership–we will be honoring one such company as a “Mid Market Deal of the Year” in about 45 minutes (via Twitter @Buyouts). As I noted in my column, I’ve also seen how effective promoting job-creation can be in lobbying Congress (by the NVCA and the Real Estate Roundtable). But I’m not convinced that, in general, the buyout strategy is about job creation–partly due to the borrowing imposed on my portfolio companies to pay for their acquisitions, partly due to the inefficiencies of many targets pre-acquisition (and the need to trim the fat), and partly because that’s what past research has shown. A PR strategy that centers on job growth arguably makes the industry an even bigger target for critics who feel they can prove buyout firms are about job cutbacks. All that said, the industry needs to do a better job of answering its critics and of getting a better shake on the Hill–I see that. One of my earlier columns had a headline that went something like this: “Is the industry going to accept SEC registration without a fight?” I meant it as a call to action. Perhaps it is a little unfair to criticize ACG for now acting. But I also don’t want to see the industry do anything that’s counterproductive.

I agree, David, that buyout firms do not have job creation as the primary motive behind their investments. I also am glad that your piece on SEC registration was a specific call to action; it's sad that only a few private equity firms were the only responders to the Dodd-Frank move while a lot of PE firms in general were whining about the upcoming regulation but not doing anything about it. 
That being said, it will be interesting to see how successful ACG's PR strategy about mid-market private equity is. There is no middle ground here: it is either going to do very well in convincing Congress that mid-market PE is the future or it's going to fall flat on its face. I guess we'll probably know in around 6 months or so.

Good luck, ACG! You're going to need it.

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