How Private Equity Works: Read this Before Calling Romney a Vulture


Phoenix is a Better name than Vulture for Private Equity Investors

Excerpts form WSJ Article

“This is anticapitalist claptrap. Private-equity firms make significant investments in companies, mainly U.S. companies. Most of their investments are in companies that underperform industry peers. Frequently these firms are on the brink of failure.

Because private-equity firms are, by definition, equity investors, they make money only if they improve the performance of their companies. Private equity is last in line to be paid in case of insolvency. Private-equity firms don’t make a profit unless their companies can meet their obligations to workers and other creditors.”

“As for turnaround success stories, Continental Airlines, Orbitz and Snapple have all benefitted at some time from private-equity investment.

Or take Hertz. Ford sold Hertz to private-equity investors in 2009 for $14 billion. These investors were able to take the company public less than a year later at an equity valuation of $17 billion.”

“Private-equity firms not only help corporate performance, but in the long run they lead to more employment and higher wages as well. The alternative to the leaner, smaller firms created by private equity are bankrupt firms that do not employ anybody.”

“Unlike some other investors who trade in debt and derivatives, private-equity firms make money by investing in businesses that make things and provide services. This industry should be applauded, not attacked.

Assaults on the private-equity industry really are attacks on economic freedom, because the private-equity process is nothing more and nothing less than free-market capitalism at work. Shame on all the people, particularly those who claim to be friendly to capitalism, who attack Mitt Romney because of his association with the U.S. private-equity industry.”


  1. Yadda yadda. The frustration with the public is not ‘creative destruction’ or whatever other capitalist policies the economic overclass want to tout. The frustration is the fact that the average Joe ends up losing their job while those on the upper end make not just millions but TENS or HUNDREDS of millions of dollars from the very deals which cost some poor schmuck their $30,000 a year livelihood.

    Nobody I know (whose opinion I value) begrudges people the money they earn by their intelligence or the sweat of their brow, even if they earn tremendous amounts of money. Good on ’em. That said, it’s damn hard to swallow Romney, et al as they build mansion after mansion while OTHER hard-working Americans scrape by on multiple minimum wage jobs.

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