Private equity has no such constraints or accountability. So while BA suffered just from being associated with Gate Gourmet, who remembers the name of its US private equity owner?
As William Lewis said (PRWeek, 2 September), private equity is now too big to be allowed to get away with it. Yet escape scrutiny it does, and not just with regard to management style.
There is a widespread assumption, for example, that all private equity makes stellar returns. The reality is less exciting. But you would never know that from reading the papers. Indeed, it is unfortunately typical that what criticism there is comes from insiders, not the press. This week, Alchemy boss Jon Moulton told a conference in Monte Carlo that the growing number of very large funds posed specific dangers for the industry. He of course runs small to middling-sized funds. The large ones, he said, had an investment strategy that created conglomerates, eventually discredited when too much of the return results from financial engineering and buying and selling the businesses, rather than from growth.
Moulton suggested the same could happen to large private equity houses – because they are so large they are forced to be less discerning about where they invest and will likely stray into areas where they have little expertise. He makes an interesting point. Will private equity houses feel the need to respond? Unlikely.