The Private Equity Council had ten members in its original incarnation—all the biggest shops. That number has expanded to 13 since the organization opened its doors in February 2007. Now there’s some reason to believe membership could eventually get a big bump. It seems the council has started reaching out to small and mid-size firms.
Douglas Lowenstein, the Private Equity Council’s president, confirmed this push to Buyouts, saying the group has established what it’s calling the PEC Network in the past year, describing it as a “loosely knit group of several hundred smaller and mid-size firms that share our interests and concerns.”
The effort is small in scale to start— an electronic newsletter detailing updates of federal and state legislative and regulatory activity, providing talking points related to the Private Equity Council’s public policy positions, encouraging firms to put together case studies of specific deals they’ve done to show how they’ve helped create value and improved the companies they’ve acquired. But it’s a clear signal that the council is feeling the need to show strength in numbers, rather than just dollars.
In fact, small and middle-market firms may be the key to changing the perception of the industry. The debate about taxation of carried interest is coming back into the headlines and it’s only going to get noisier the closer we get to the presidential election.
The PE Council can make a strong argument about value creation, providing pie charts and bar graphs, plenty of facts and figures to support its case. But as long as it’s viewed as representing the interests of rarefied affluence it’s going to be hard to engender much sympathy in the general public. Stories about diminished staffing levels in the nursing home industry in facilities owned by buyout shops, for example, have a much more direct impact, and stake out the high moral ground.
That’s why bringing the smaller shops into the fold, to whatever degree, can only help. It’s going to take headlines about deals that provided the capital to save family businesses, deals that preserved and created jobs, to put a different face on the buyout game. At least on Main Street.
It’s most likely too late for this move toward broad cooperation among buyout shops to have much impact on the upcoming election but this push for better communication and wider participation will bear watching when the taxation debate heats up again. If private equity is going to face greater regulation and scrutinization as an industry, which seems inevitable, it’s going to need organization on that level to be part of its response.
Lowenstein seems well aware of what’s at stake, stating: “As we begin a new legislative season next January, with a new Congress and a new President, we believe it will be critically important for those debating public policy issues that have a direct effect on our industry to hear from firms that represent the full breadth and depth of the private equity industry.”
Stay tuned …