From Literary Review, May 27, reviewed by Simon Nixon:
Some of the most disagreeable people I have encountered in three decades of financial journalism work in private equity. A university acquaintance I had not seen for years once invited me for drinks on the terrace of his vast Thames-side apartment, only to demand that I lean on a colleague to kill an inconvenient story. The husband of another acquaintance, who also worked in private equity, once tried to pull the same stunt. That time I didn’t even get a beer.
This is an industry that takes the private part of its name with deadly seriousness. It usually exercises total control over its operations, deploying financial muscle rather than charm to enforce submission and cloaking almost every aspect of its business – the provenance of its money, the performance of its companies – in secrecy. Yet over recent decades, private equity has quietly captured vast swathes of the economy and accumulated political power for which it is rarely held publicly accountable.
In The Asset Class, Hettie O’Brien, a Guardian journalist, goes some way towards redressing the balance. She traces the industry’s origins to the 1970s, when William E Simon, President Nixon’s former Treasury secretary, became convinced after a visit to the Soviet Union that a bureaucratic corporate managerial class was leading the United States towards communism. His solution – to reinvigorate capitalism by buying underperforming companies and breaking them up or exposing managers to the incentivising effects of high debt – was enthusiastically adopted by a generation of asset strippers, men such as Sir James Goldsmith and Jim Slater, who styled themselves as buccaneering apex predators, culling the corporate lame to strengthen the herd.
By the 1990s, however, the industry was awash with more money than could sensibly be deployed, channelled through the secretive family offices of the burgeoning global super-rich. Since fund managers earned 2 per cent of every dollar invested and 20 per cent of profits above a certain threshold, the incentive to put capital to work at almost any cost was irresistible. The solution was to acquire public companies and load them with debt levels that would never be permitted in public markets – in effect, compelling the target to finance its own takeover. If the business subsequently buckled under the weight, the private equity house had already got its money back. The model worked best, as O’Brien observes, where customers had no alternative but to keep paying: essential services, which were conveniently reframed as a public benefit, bringing much-needed capital to a cash-strapped state....
....MUCH MORE
Although it is difficult to top that declarative first sentence: "Some of the most disagreeable people I have encountered in three decades of financial journalism work in private equity" Literary Review has on offer:
