Wednesday, August 3, 2016

Decoding Private Equity Enterprises

During a past life (not really, but it seems that way) I worked in the financial arena. Nowadays I rarely write about my former life. My years at a small firm provided a peek into the world of Wall Street and the financial dealings of ‘the big guys’.

Sometimes – and this is nothing but my opinion – companies (banks, brokerage firms, insurance companies and other financial institutions) purposely create documents, ideas and concepts difficult for non-financial professionals to understand. Businesses do this for a number of reasons:

·           *  The legal department requires a lot of detailed mumbo jumbo.

·            * The company wants people to feel nervous about making their own financial decisions, fostering an atmosphere spurring individuals to rely on someone else - a financial representative – to tell the person what to do.

·            * The font on documents is so small we (seniors and other vision-impaired folks) cannot clearly read them.

·           * Documents are frequently crammed with unneeded and unnecessary information only distantly related to the transaction in progress. Most people never read the fine print.

·           * Financial papers are boring and put readers to sleep, or minimally in a stupor…

Sometimes an item rises above the cloudy haze and explains a concept in a simple, understandable way.

I came across one such article recently, the subject matter private equity companies.

I can imagine readers rolling their eyes and assuming the topic has nothing to do with them. Why do I need to know about private equity? People are thinking. I do not have gobs of money to invest. So how do private equity companies impact my life and me?

Initial thought might be – not at all.

But that would be a mistake.

in an easy to read, simple to navigate, painless power-point-type presentation illustrated with cute graphics, four business correspondents answer the question:

Why should I care about private equity companies?

The free financial dictionary defines private equity companies as firms that buy out publicly-traded companies, making them privately held.

Here are just a few ways these companies touch our lives.

Private equity firms:

·      Own companies we patronize (California Pizza Kitchen is owned by Golden Gate Capital; Domino’s Pizza by Bain Capital).

·      Maintain and operate infrastructure and government services (the Bayonne NJ water system).

·      Buy and sell companies (Simmons Bedding was bought and sold 5+ times over the years by private equity firms before declaring bankruptcy. But don’t worry – the equity firms made money even though lots of employees lost their jobs and shareholders lost money).

·      Build buildings and roads (Indiana Toll Road, California toll lanes, unsuccessful ventures for the states and drivers. Once the firms took over, tolls increased).

·      Invest in private schools and educational products.

·      Invest in media and communications.

·      Manage real estate holdings (The Blackstone Group advertises itself as the largest real estate equity firm in the world. Holdings include Motel 6 and Hilton Worldwide).

·      Etc…Ironman (sports games) is owned by Providence Equity.

You can wow your friends by explaining how our lives are controlled by companies most of us never heard of.

Perhaps not exciting, but a different topic of conversation and a pleasant change from politics!

5 comments:

  1. Even I understood this...amazing.Loved the power point. Thanks!

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  2. Love/hate relationship with all things financial, here.... ;)

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    Replies
    1. I understand...you and lots of others feel the same way.

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  3. I worked in the Bell System Finance Department for a long time, so had some vague notion of what went on in the world of Wall Street and read the WS Journal. Why I read other things today.

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