Private Equity Too Disorganized to Fight Attacks, says Brentwood’s Barnum, Who Confirms Fundraising Plans
So says William Barnum, a Brentwood Associates partner. Barnum, who co-founded the PE practice at Brentwood and speaks about fundraising (below), says private equity is not as well organized as other industries. He contrasted PE to venture capital, where nearly all VC firms belong to the NVCA, Barnum says. The group does a pretty good job of representing venture capitalists, says Barnum. (Brentwood was a member of the NVCA during the 1980s, he says.)
“Private equity hasn’t done a good job representing itself,” says Barnum, who spoke to me by phone today. “It isn’t as united in the ‘one for all and all for one’ way that some industries are.”
The lack of cohesion in PE may be due to each firm having a different investment strategy, Barnum says. One PE firm may focus on middle market consumer companies (like Brentwood), while another may target large financial services buyouts. And another firm may focus on growth equity. “What we’re all doing isn’t the same,” Barnum says.
PE firms also compete with each other to buy companies. In auctions, whoever wins the process usually acquires the target. This compares to the VC industry, where multiple firms typically invest in a company to diversify risk. There is more cooperation among firms in the VC industry, which may explain why they are better coordinated, Barnum says. “PE isn’t as collaborative of an industry as VC,” he says.
The PE industry does have some trade groups to help with its image. Last week, the Private Equity Growth Capital Council, an advocacy organization that represents the PE industry, unveiled a new campaign, “Private Equity at Work,” that aims to fight baseless attacks. The PEGCC represents about 36 firms, including the Blackstone Group, the Carlyle Group and TA Associates. By comparison, the NVCA has more than 400 members.
(One industry source, who called Barnum’s comments “absurd,” says that the NVCA hasn’t done much to defend the VC industry against attacks. They pointed to a Washington Post story today that examines the “subtle influence” VCs currently exert at the Department of Energy. )
“On behalf of our member firms and the PE industry, we have taken unprecedented steps to highlight the important contribution that private equity makes to the U.S. economy,” says Ken Spain, a PEGCC spokesman, who says the group plans to “aggressively defend” the PE industry against mischaracterizations and attacks.
Separately, Barnum did confirm that Brentwood would likely begin fundraising for its next fund later this year. The PE firm’s current fund, Brentwood Associates Private Equity IV LP, is about 70% invested, he says. The pool raised $440 million in 2006.
Brentwood fund V will likely raise about $500 million, he says.