Secretive, greedy, asset-strippers: private equity and the press.

This is a perception that is so strong that it has even crossed over into the realm of fiction. The recent Denzel Washington vehicle, The Manchurian Candidate, a remake of the 1962 film, had as it main villain not a person, but a business; a private equity firm to be exact, and one which even has a private army at its disposal (apparently they were looking to exit via an IPO, but a secondary buyout proved to be easier).

Just a casual flick through some recent press clippings shows private equity is still viewed with suspicion, even by financial journalists. In March, for example, in the UK’s Daily Mail, a columnist writing about the £6bn buyout of SunGard led by Silver Lake ends her piece ominously: “But make no mistake. These deals involve the future of some of our best-known businesses, along with thousands of jobs and pensions. They deserve our full attention.”

Anthony Hilton, writing in the London Evening Standard in August, complains about private equity’s tax avoidance measures. Carlyle has been in the press recently over its stake in QinetiQ, with eyebrows being raised at how much money the firm is going to be making when the UK Government majority-owned defence technology business floats.

The situation in the UK is very different to the rest of Europe. Britain’s private equity industry is more mature and involves more money, so it is perhaps inevitable that it attracts more attention from the UK press. To be fair, most of the coverage of private equity concentrates on deals and fund raisings, ie objective news reporting rather then subjective editorialising, but whenever the latter is involved, there is often a negative perception permeating the piece, usually revolving around the themes of secrecy, tax and asset-stripping.

That being so, the private equity industry in the UK has probably never faced the attack the Germans witnessed this year with the infamous “locusts” by Franz Müntefering, head of the leading party in Germany’s governing coalition. This kicked off a nationwide debate in the German media about foreign companies buying domestic companies. It was part of a wider debate in Germany that has been raging for the best part of a decade as the country faces up to the realities of capitalism: the move away from a social market economy to one where the shareholder rules has not proved an easy one for the national psyche, and private equity bore the brunt.

Anne Holm Rannaleet, a partner at Industri Kapital (IK), says: “There’s a lack of understanding because it’s still relatively unknown there and so it gets written about negatively sometimes. There is a perception of asset-stripping and a lot of focus on the amount of money that is made from exits. People are trying to blame someone else for their own shortcomings.”

IK has had its fair share of criticism over the years, most recently over its fund raising, but this was an issue that was covered only really by the trade press so there were no negative connotations about the industry as a whole. Rannaleet mentions when the firm completed its first public to private deal: “We were unprepared for the reaction. Not being a public company we focused more on our business than building awareness, and it was difficult to counter some of the stories in the press because we were bound by confidentiality agreements.”

In order to combat the negative associations with the press, the industry must do more. This responsibility rests not just with the national associations, such as the British Venture Capital Association or even a pan-European body like the European Venture Capital Association, which both have well-rounded press strategies, but also with individual firms. Andre Jaeggi, managing director at Adveq, says: “The industry should be open and explain why and what they are doing and for whose benefit. We live in a world of under-funded pension funds and if you look at the returns made on private equity you can see what the industry can do for people, but that is a point almost never made.”

Firms not talking to the press can create a vacuum, which is more often than not filled by rumours and speculation. As Jaeggi says in discussing the troubles of the Texas Pacific company Gate Gourmet: “If you have a private equity house really pro-actively explaining what needs to be done in re-shaping a business then the fall-out will not have to be so dramatic. By not talking to the press, damage gets out of control.”