Thus, these days, private equity is seen as a way to go around discosure requirements - either to avoid the cost, the liability (notably with the Sarbanes-Oxley Act that follwoed the Enron meltdown) and the outside scrutiny on your business.
Another important point is that public companies are currently bedevilled by the "agent-principal" issue, i.e. how do owners make sure that managers have the owner's best interests at heart, and not their own? when you see the stock option and golden parachutes that some managers have obtained, it's become a real issue. Private equity is seen as a solution to that, because it makes ownership and management a lot closer (the owners manage directly, or are a small group enough that it is easy for them to establish oversight over the managers they choose).
Finally, in the financial sector, private equity is a great way to set up funds that do almost everything banks do, but with a lot fewer rules applying to them (capital adequacy ratios, diversification requirements, know-your-customer stuff, public repuation issues, more disclosure, etc...) In the long run, we're all dead. John Maynard Keynes
Reinvent "ownership" by using a different enterprise model.
One where the financiers, and the users of finance, genuinely share the risks and rewards.
The PLC is a toxic legal form, that's the truth of it: truly sociopathic. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
As we add regulations to the public companies with SarbOx, maybe CEO pay in future,,,we're going to stretch the difference between private and public companies. Actually it appears that a consensus is developing that SarbOx went too far. The villians at Enron are in jail, none of them prosecuted under SarbOx, but instead under existing regulations at the time of the crimes. In many ways SarbOx has become the accountant's full employment act--auditor fees in a public company I'm familiar with have tripled. we just need to make sure that new regulations make sense, and we don't have the age old problem of unintended consequences--like a significant % of public companies going private, where the small investor won't be able to invest.
I believe these issues are being studied now, and recommendations will surface. I'm not sure that it is a really big problem yet, because public companies have the tremendous advantage of being able to raise funds much more quickly, and from a much larger investor pool than private companies. That is an advantage that is not easily offset.
Bank lending and IPO are to bring the "lots of small inverstors" in (sum of small deposits or small share purchases), may be these are no longer needed now...
No data to choose which story has the biggest factor :).
Another point is that accountants have been made legally responsible by recent cases, asking for more money is a way to ask for more independance (because you can refuse more direct orders/clients), it might not be fully a result of SarbOx creating more work but just logic on existing regulation and recent legal outcomes.
As always, one narrative is not enough :).
Private equity firms in the buyout segment are taking more of a global view. They are looking at buying out firms headquartered overseas. And by necessity, this will move their business outside the US to some extent. London of course would be an ideal location. As an example of this, I invested in a buyout fund recently where they gave you options as to how you wanted your personal investment distributed between US and International--you could choose nothing outside the US, 10%, or 20% outside. (should be interesting for them to administer).
Second, the reaction to regulation I've heard as it regards moving outside the US, has been focused on small companies that are evaluating going public. SarbOx adds an estimated $2 million per year of spending to such companies, which is a big number for them. Some companies have therefore gone public on the London Stock Exchange, or others. The problem they have run into is there does not seem to be as much liquidity for small companies on those exchanges. You need people buying and selling a stock actively to make a market, and I've heard that is not happening.
I have not seen much data on either of my points--information is more anecdotal.
I would be interested in articles or data on the point you make. The regulatory issues in the US are more focused on public equity companies, so I'm not sure I understand the rationale for the argument.
Pension funds invest in weapons
It appears that Dutch pension funds are investing, for example, in companies producing cluster bombs or land mines.
What does this mean? Are there no better investments for retirenment?
In their defense, good analysts are really good, and provide really invaluable insights and perspective. In the long run, we're all dead. John Maynard Keynes
I've always felt the issue with analysts is that your customers don't value your work--ie., you can't get paid for doing these reports. There were independent analyst firms in the early '70's, and they had trouble staying in business. It might be a good time to try that model again--but with so much money to be made in the deal side, investment banking, and all of the financial arbitrage opportunities,,,,,I would imagine good analysts would be tempted to go where the big money is.
Also, imho, analysts just provide a platform for an investor to begin his own evaluation of a company. One has to do the hard work themselves--no analyst is going to just give you a wonderful way of making millions. If he had that capability, he would just create a fund and run it and make big money for himself. Luckily the requirement for transparency in US markets today keeps investors on more of an equal footing,,,,,and the internet has been an incredible evening of the playing field. I referenced that La Jolla 10K in the diary, and you can get that information as quickly as an analyst. You can also listen in on the company conference call yourself. Do your own research on the company's business--in this case a disease called Lupus. It's not all that difficult to have more knowledge than the analyst,,,,but it takes focus, time, and hard work. There are no freebies here.
