The private equity community is notoriously tight-lipped. More often than not, large buyout companies employ public relations firms to act as gatekeepers, and from a press point of view the drawbridge is nearly always up.
So while trade associations such as the European Venture Capital Association and its British equivalent the BVCA work to put a gloss on the industry, the firms themselves remain stoically silent through good times and bad. The industry has always argued that it is precisely this lack of scrutiny that makes it successful. Buyout firms can do things with their portfolio companies that would not be possible under the short-termist glare of analysts and journalists to which public companies are subjected.
But as more blue-chip household names come on to the radar screen of an increasingly well-funded industry, it will be interesting to see how long the buyout houses can maintain this dignified silence. Like it or not, there is an emotional attachment to companies such as Marks and Spencer, Sainsbury and Debenhams from a very wide group of stakeholders.
There are legitimate issues here, as well as baser instincts. If you are a pension fund participant, you might want to know where your future is being invested. Furthermore, large blue-chip companies form an integral part of any developed society and work hard at fostering an emotional connection with their customers. It is understandable that those customers should want to know something of the ownership structure.
The baser instincts include two of the oldest – jealousy and nationalism. Fund managers at private equity firms earn a huge amount of money compared with most of the people that work in their portfolio companies. If they have to restructure, they want to do it with impunity, and this job would not be any easier if the mainstream newspaper press publicised the salaries being hauled in at the top to carry out the dirty work at the bottom.
There are already murmurings of discontent from a wide variety of disgruntled stakeholders across Europe. In Germany, politicians bemoan the negative impact of short-termist investors on the economy as a whole. In the Nordic countries private equity is seen as contrary to the well-ingrained spirit of openness. France has long had a mistrust of Anglo-Saxon corporate raiders. But a common theme is that private equity firms are somehow alien to the country in which they seek to do business.
There are powerful and not necessarily very rational forces at work here, but arguably the time has come for the private equity industry to cultivate a broader constituency. There is often talk that private equity is becoming a genuine alternative to public market ownership, but if buyout groups are as positive and growth oriented as they claim to be, perhaps they should start advertising that a bit more.