Friday, April 1, 2011

Industry Thoughts | Private Equity and the Investment Thesis

Dan Primack of Fortune penned a quick post today wishing that private equity firms would give a little more detail about their overall investment thesis when they buy portfolio companies. Reporters care less about the seller than the buyer, Dan writes, so explain at the closing of the deal why a firm bought the company and what's the game plan while they still have journalists' attention.

Yes, Dan, it would be nice for firms to be a little more specific. (It would also make MY job easier to determine deal flow for my work.) However, until there's more specific and targeted regulation on PE, you're not going to get as lucky and have PE firms be more welcoming in terms of sharing that information. Knowing firms I deal with every day, I'd be pretty surprised if they changed.

Now, while I say that, I'm not being bitter towards private equity firms. It's more so that there's no reason to share that information about the investment thesis, as the only people who REALLY need to know are the LPs and lenders. Again, when regulation hits, we'll probably see some compromises.

One other thing: I also think that because journalists in the private equity space have different sources, it's important to recognize their scoops. A good example is with HIG's Hooters of America deal: The Deal was able to uncover the mystery private equity firms that worked with Chanticleer (along with the purchase price), then Pitchbook was able to identify the Texas Wings buy that went along with the deal. It sucks sometimes that you have to go through 5-6 sources to get the entire story, but that's how the scoop world works.