Average private equity returns have underperformed the market. And the evidence suggests private equity firms mislead investors by overstating their profits.
Studies show that the private lives of CEOs have a huge impact on shareholders. Following the death of a child, profitability was roughly 21 per cent lower in the two years after the tragedy. But the share price goes up when the mother-in-law dies.
The reports of private equity's death are exaggerated. More to the point, private equity is like a vampire. Cheap debt and money sloshing into the system means that tighter credit controls will not kill of private equity. Like a vampire, it will stay Undead, just waiting for the right moment to strike.
The private equity party seems to be coming to an end, leaving the buyout firms to take the money and run. The fallout from the subprime mortgage defaults are making the banks nervous and investors are turning to safer bets.
Company boards will be subject to tougher rules ensuring they manage conflicts of interest during private equity bids and leveraged buy-outs. But the new rules are not perfect and won’t stop conflicts of interest.
CEO turnover seems to have peaked but boards are becoming increasingly ruthless and are more prepared to give bosses the chop. And the latest figures show that the private equity boom is taking its toll on CEOs.
CFO job turnover is on the up and the latest figures show that private equity is driving the job churn. After a private equity outfit takes a firm, the CFO is always the first out through the door.
