How did the protestant work ethic of Sweat Equity get replaced by the Blood Equity of the leveraged buy-out? No value is created, other people's money is used to buy companies and the resulting profits are gained by corporate dismemberment, divestiture, and downsizing.
This is the premise a new book by Josh Kosman, a veteran financial reporter and the author of The Buyout of America, How Private Equity is Destroying Jobs and Killing the American Economy.
There is no point in turning this into a debate about the function of private equity given that it is now a phenomena that is well integrated into the warp and weft of the financial landscape in America. However, it is always wise to explore the career possibilities this portends for professionals and executives. What are the opportunities?
What are the employment opportunities that present themselves? Well, for starters, private equity firms have become very involved in start-up investments. Start-ups have always been the domain of the Venture Capital firms. But they have been hard-pressed to fund new ventures in the past several years. They lost investors initially after the crash and then they have been preoccupied with keeping their current farm of companies afloat. Private equity offers an alternative funding source for budding entrepreneurs for long-term funding.
Seasoned senior executives who may be struggling to find a traditional long-term position in their indusrty may find relatively short term assignments doing turn-arounds for PE companies in distress. Depending on the expertise brought into play by the executive this could become serial well-paid assignments. Typically these engagements include significant profit sharing on the other end of a successful turn-around regardless of the outcome for the company.
Business Development and Due Diligence
Somebody has to do the deal finding, and due-diligence for a private equity firm. It is a very competitive environment and to the victor goes the best prizes. This is similar to the function done for venture capital investing and by analysts, indirectly, for investment banking. It can very lucrative if you have an inside track on a sector and turn over a few rocks. For example, what are the odds of Yahoo now being a private equity buy-out once the current CEO fails to turn it around?
Starting Your Own Private Equity Firm
Remember all those well-off executives that you used to report to who are now all retired? They would be a perfect source of partners to start your firm. They would put up little money but lend their names and credibility to the banks who will leverage the deals for you. Their influence and reputation can enhance the consummation of those hard to find deals.
Taking Private Equity Offshore
As we move forward in an economy where emerging marketplaces are acting more like market makers, opportunities for leveraged buy-outs have great potential to emerge. If you have spent time abroad or are living somewhere other than the USA, then you could escort US and European PE firms into new markets in other regions and countries. Applying your knowledge of a regional marketplace and the domain players within it could enable you to act as a deal-making liaison across borders.
The fine art of re-branding and repositioning one's career is built on a sound strategy to redefine who we are and where we are going. Like the target of a private equity leveraged buy-out, we may need to divest ourselves of out dated belief systems, cast off old non-essential experiences that drag us back to the past, and re-start our direction with leaner, more relevant value proposition. Heading off the beaten path to private equity may be the good result.
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