Private Equity Reputation

by John F. Dini of ExitMap 

Private Equity Groups (PEGs) are seen by some as the ultimate villains and by others as heroes. It really depends on who you ask. Honestly, both views have some truth to them, but you can’t really say one fits all.

The “Great Satan” Reputation
Private Equity Groups (PEGs) often acquire companies to improve financial performance, which can lead to significant layoffs and cultural shifts, contradicting their claims of valuing corporate culture and employees. This approach may result in negative outcomes, including poor performance and bankruptcy.

The “Great Savior” Reputation
Conversely, many Baby Boomer business owners are reaching retirement and may require PEGs to buy their businesses, which often contain substantial value. PEGs can help facilitate transitions to new ownership, proving beneficial for businesses with real cash flow. There’s an estimated $14 trillion in illiquid assets tied up in these companies.

Reputation Counts
Business owners should thoroughly investigate PEGs before selling, as not all are trustworthy. High compensation for PEG representatives may lead to a focus only on financial outcomes, rather than the overall success of the business. Therefore, evaluating a PEG’s reputation is crucial to ensure future viability.