Fortune's take on private equity opposite rival BusinessWeek's
TheDeal.com executive editor Yvette Kantrow noted that Fortune magazine’s recent story on private equity presented a totally different angle than rival BusinessWeek focused on earlier this month.
Still, she argues, both missed the point.
Kantrow wrote, “Private equity’s practitioners aren’t barbarians, [Fortune’s] Nov. 27 story suggests, but rather, management geniuses. In fact, it urges public companies to take a page from the private equity playbook. ‘Investigation shows why privately-held firms â€” at least if they’re owned by one of the major buyout shops â€” have important advantages over competitors, and why they’re regrading the playing field in several industries. Many of the lessons apply to virtually any organization,’ it chirps.
“We’ll get into just what those ‘lessons’ are â€” and why it’s virtually impossible to apply most of them to a public company â€” in a moment. (But here’s a hint: Public companies have these pesky outsiders they must answer to called shareholders.) But first, we want to point out that Fortune’s take on private equity, though positive, is pretty much as cartoonish as BusinessWeek’s. The latter paints private equity practitioners as money-hungry potential fraudsters who are raping companies they own for onerous fees and burying them under piles of debt; the former wants to nominate PE folks for management sainthood because they allow talent to flourish and ‘produce stunning results that others can’t match.’ What neither of them attempts to do, however, is take apart any actual deals the PE crowd has done to see how they’re faring, based on some real metrics â€” coverage ratios, acquisition multiples, default rates, etc. (Forgive the shameless self-promotion, but we attempt to do just that in this week’s cover story.) Isn’t that the only way to judge if the private equity boom is good, bad or, much more likely, somewhere in between?
“Fortune, for its part, is more content to view private equity as â€” what else? â€” a management story. The piece sings the praises of PE management techniques and then â€” and here’s the really amazing part â€” blithely urges public companies to try these tricks at home.”
Read more here.