PE funds to act like owners

The danger is that public funding will constrain the ability of PE funds to act like owners – that compliance with regulations and reporting requirements will slow down or stall PE’s fast attack. After all, that’s the advantage that today’s private equity players hold – and the reason Chrysler’s stake holders have decided to go private. According to analysis by Bain & Company, the global business consulting firm at which we work, private equity firms still control assets that are worth less than 3% of the assets held by the world’s public companies. What’s more, today’s private equity investors – pension funds, insurance companies, wealthy individuals and endowments – are by and large the same investors that own the most stock in public corporations. By the same token, the managers of PE-owned companies come from the same pool of talented executives than run the best public companies. Same investors, same management talent. So where does PE’s real advantage lie? If you boil it down to one thing, it is the behavior of shareholders. Public-company shareholders behave like, well, shareholders. They are largely passive and slow to react. Or they cast their vote by dumping their shares.

For Complete IIPM Article, Click on IIPM Article

Source : IIPM Editorial, 2008

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative