Yesterday I talked to a few PE pros about the big news: Private equity is finally getting its chance to help assuage the economic crisis, after months of nagging that it has “massive pools of capital that could be put to good use.”
Setting aside any conversation on logistics, or any debate over whether it’s smart for private equity firms to gobble up toxic mortgage-backed securities willy-nilly, or whether LPs want them to, or whether they even want to… let’s look, for a minute, at the potential positive effect this decision could have on perceptions of the private equity community.
Those I spoke with were both interested and delighted at the inclusion of private equity in the plan for bailing out our banks. Said one PE pro: “The government is finally acknowledging that private equity firms are an important source of capital for companies.” I’m not sure if it’s “important” so much as it is “the only” source of capital (save for hedge), but really, what’s the difference at this point? Private equity has been invited to help.
If all goes as planned (and that is a massive, massive “if”), private equity could gain some positive coverage from the mainstream media, after a year of getting blamed for messy situations like Chrysler and getting bashed by populist rhetoric from the SEIU and other labor unions. In fact, with talk from entities like SEUI of “pulling back the curtain” on private equity firms, this is a fantastic opportunity for firms to reveal there’s something positive behind it.
But it’s not that easy. Private equity firms have to be careful not to appear like short-term profiteers. “Anything that comes off as taking advantage of the situation, running away, and leaving the government to hold the bag,” is just going to make things worse on private equity, from an appearance standpoint. And we have discussed the importance of the uphill public relations battle private equity has faced. The incentive to appear as “in it for the long haul,” an idea PE firms stress enough already, is even more important in this situation.