On the one hand they’re trying to tell us they’re ethical, socially useful guys; on the other hand they’re buying debt in companies they own at discounted prices. This is the wacky world of private equity.
Few things could more galling to the banks who bank-rolled the private equity funds’ takeovers, than to see the private equity funds buying up that debt at a discount.
The private equity people are thinking that, if the companies they own do well, then the debt will be worth more; if the companies do worse, then their investors won’t get any return; and if the companies go bust then, as debt-holders, they’ll be represented among the creditors when the companies’ assets are liquidated.
What you might call win, win, win for the private equity funds; lose. lose, lose for the banks; and maybe, maybe, maybe for the investors.
In the meantime the private equity industry has appointed Sir David Walker to produce a code of conduct to spruce up the industry’s public image.
The image is in need of a spruce. A survey by Grant Thornton, the accountants, has found that 73 per cent of private equity executives think that the private equity industry has high ethical standards.
That means, presumably, that 27 per cent of private equity industry executives don’t feel their own industry has high ethical standards, a somewhat surprising figure.
Another surprising figure is that 50 per cent of the execs thought it wrong to describe the private equity industry as ‘unethical asset strippers in for a quick buck’ leaving the other half, apparently, believing that this description has some truth to it.
It turns out from the Grant Thornton survey that only 24 per cent of private equity companies have a formal ethics code.
Predictably half the executives blamed a left-wing press for their negative public image.
It would be fairer to blame the reclusiveness of the private equity industry’s bosses. Whereas you see loads of CEOs on Bloomberg TV, on CNN financial programmes and on the BBC business news, you hardly ever see a private equity industry CEO.
Damon Buffini of Permira is the only one I’ve ever heard on the broadcast media. He was on the BBC Today programme and was not exactly a ball of fire.
TOMORROW: THE TEN MOST CHARISMATIC SEMICONDUCTOR BOSSES.
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