Your comments are right on,,, that the buy-out segment is growing dramatically, and leverage is an important element, with all the risks that leverage brings. And you are also correct on the Internal Rate of Return focus of private equity, and that goal of course means that more money returned, and returned faster, are the key elements by which they are measured by their limited partners. Those goals are not necessarily in line with goals for the overall health of the business--not necessarily contradictory, but one would like to see more synergy in the board room. I'm a big proponent of other elements of the business model, the business model for the individual company, not the VC's. And these elements would include things such as high level of commitment to quality; close working with the customers understand evolving needs and thus achieve new innovative products; very fair pay for all levels of employees, including stock options for all if it's appropriate; and basically having business strategies, objectives, and ethics that win the hearts and minds of the employees, etc, etc. Most VC's would not be as excited about some of these goals as a high quality senior management team for the business would be (I guess that comment is overly kind to most private equity people).
I'm unfamiliar with the public-private partnership concept in venture, but that would be an interesting model and discussion.
Do you have a rough idea of the total amount and public/private ratio?
As I understand, shareholder value is the king indicator of company's success. Morevoer, corporations are (kind of) legally oblidged to maximize shareholder's value, are they not? How is can be legally determined whether the board does its best? Can long-term success be easily lost in a collective drive for fast profit margins?
It sounds to me that gaining maximal profit for investors can put a lot of pressure on workers. Is there good evidence that this pressure is increasing? How long were Ford and General Motors were giving "generous" salaries to their workers?
Shareholder value is important in both settings. you point out that the private equity guys may be very short term because they want to make their money as quickly as possible, improve the company and sell it. Yet further up thread someone comments on the pressure on public companies to make quarterly projections, and points out the temptation to eschew the long term to improve the short.
you find good people and good leaders in both settings, imho, and the opposite as well. personally, I don't find a conflict between investor and employee goals. well motivated and well paid employees build unbelievable companies. and leadership, ceo's, should easily be able to make that point to investors,,,and drive for great results. there is not conflict with customers either--innovate, give them quality and service, and they will flock to you. this can be done by private companies and public companies. but it takes strong leadership with intellectual depth, good ethics and values--qualities not always easy to find, + a ton of other qualities.
The goals of investors, employees and customers might be similar, but basic impulses differ quite much.
One other naive question: when people speculatively buy shares in the market while the company is not issuing them, are they really "investing" in a technical sense? No new money comes to company's pocket, it is just appreciation of (presumably) growing value of the company, right?
