11-Jan-2012 - As Romney Advances, Private Equity Becomes Part of the Debate

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Mr. Romney’s opponents are the loudest, accusing such firms of carving up companies and cutting jobs. Newt Gingrich said over the weekend that Bain looted companies and fired employees, and Rick Perry on Tuesday called private equity firms “vultures.” An anti-Romney documentary calls him a “predatory corporate raider.” The attacks have unnerved many buyout executives — especially those who have long used their fortunes to support the Republican Party. As Mr. Romney’s rivals have sought to turn the primaries into a referendum on his business career, the private equity industry finds itself under fire from those cheap NFL jerseys it thought were friends. And if Mr. Romney faces a well-financed Obama re-election campaign, the industry’s top officials know that the president will continue to push the portrayal of Mr. Romney as a fat-cat job-destroying deal maker. “We were bracing ourselves for this, but we’re not even in the general election yet,” said a senior private equity executive who spoke on the condition of anonymity. “Expect more pain.” Just as Mr. Romney and his advisers are defending his work at Bain, the industry is also trying to blunt some of the attacks. For a group of Wall Street executives who prefer to operate out of the spotlight, the repercussions could be considerable. Among the things the industry wants to preserve is favorable tax treatment for profits on private equity custom nhl jerseys deals. “There is a lot of misinformation being spread, purely for political purposes and on both sides of the aisle, as it pertains to private equity,” Steve Judge, interim president and chief executive of the industry’s lobbying group, the Private Equity Growth Capital Council, said on Monday as the attacks mounted in New Hampshire. The council will roll out an image campaign soon, according to two people with direct knowledge of the plans who requested anonymity because they were not authorized to discuss them publicly. Economists differ on the effectiveness and impact of private equity firms, which often borrow large amounts of debt to buy companies before selling them, hopefully for a profit. Despite the critics and the defenses mounted by the industry, the research is a little less than clear, partly because much of what these companies do is private and not subject to full disclosure. A working paper released in September shows that private equity-owned companies shed slightly more jobs than similar companies, though the difference was quite small. In total, they shed about 1 percent more jobs. The study — by Steven J. NFL jerseys wholesale Davis of the University of Chicago; John C. Haltiwanger of the University of Maryland; Josh Lerner of Harvard, and Ron S. Jarmin and Javier Miranda of the Census Bureau — looked at about 3,200 buyouts conducted between 1980 and 2005. It found that companies bought by private equity firms let go a larger proportion of workers than similar firms, shrinking their work forces about 6 percent more over a five-year window. But companies bought by private equity firms also tend to open more new branches, offices and factories and hire more new staff members, partly offsetting the job losses. Some economists also argue that private equity takeovers make good economic sense in the long term, even if they result in more layoffs in the short term, by making companies more efficient. “Private equity firms have an impact on productivity,” said R. Glenn Hubbard, the dean of the Columbia Business School and one of Mr. Romney’s economic advisers. “That doesn’t mean that people don’t lose their jobs. But the question of whether private equity adds value? It’s settled among economists.”

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