Private Equity Viewed from the Outside

Media coverage of private equity firms is often inadequate at best and misleading at worst. As a result, members of the public often have a superficial concept of what private equity firms do, if indeed they have any notion of the nature of private business investment at all.

It is true that private equity firms are, by their very nature and definition, “private.” As they are not in the business of touting what they do to the general public there is a vacuum that can be filled with all manner of misconceptions. There is a certain, inevitable need-to-know status when it comes to private equity funds. Here we see that word again: private. Quite simply, not everyone has the capital to be an investor of this caliber. It is also the case that not every business or infrastructure project is structured or designed for a makeover from a group of private investors.

That said, it is not the case that the funds and their investors answer to no one. The International Private Equity Valuation (IPEV) Board exists to ensure that private equity and venture capital investors conform to international regulations and norms within the industry. In this way, best practices and uniformity across investment areas is maintained.
It is also essential to dispel the misconception that private equity firms launch themselves into a business in order to simply gain its assets. By getting involved so intimately, this unfounded notion contends, the investors can then dismantle the company or shrink it until it is a skeletal version of its former self. Then, this argument maintains, they can avail themselves of what remains.

Nothing could be further from the truth, of course. Private equity investors are interested in growth, first and foremost. The longer a growth trend can continue, the better. Investors who are willing to lock capital into an enterprise as the firm guides it through a successful transition, are not interested in a quick payday. They are visionaries who are looking to grow the economy as a whole in order to set the stage for the next round of startups and infrastructure projects to get off the ground. Private equity investors are of a type: they are never simply satisfied with one return on one investment. They are in it for the long haul and they are looking for new opportunities at every turn. Growth begets growth, just as rising tides lift every boat on the water. Businesses run on capital. The economy runs on capital. Private equity helps fuel the economy. This is the plain truth and it is one that we should not be afraid to speak aloud.