“When you have excited customers, you’ve got innovation, you’ve got new products. That leads to the creation of jobs, and that cycle turns over and over again,” said Berry Plastics CEO Jonathan Rich. “The people that we’ve had investing with us in private equity are creating that future.”

In September 2006, Apollo and Private Equity firm Graham Partners acquired Berry Plastics.  Since partnering with Apollo, Berry Plastics has:

• Increased net sales by $3.6 billion between 2005 and 2012;
• More than doubled its headcount, employing more than 16,000 people today;
• Expanded to 85 facilities, and is currently expanding its Evansville production facility, as well as building a new factory facility in Madisonville, Kentucky. These projects will create more than 500 new jobs.

“Berry Plastics is a true success story of how private equity helps companies flourish every day,” said Steve Judge, PEGCC president and CEO. “When private equity is able to identify a company poised for growth, and provide the strategic vision and operational tools needed to achieve that growth, we see extremely successful outcomes.”

A commonplace practice is to employ a 100-day plan at the beginning of an investment, created collaboratively by private equity managers and leadership teams at the companies in which they invest. A recent PrivCap interview with MidOcean Partners Managing Director Frank Schiff highlighted the 100-day plan, where, spending a lot of time with a company’s management, his firm aims to, “take companies in the middle market from where they sit today and hopefully put processes in place in order to really grow and go to the next level.” According to Schiff, 100-day plans cover a range of strategic issues, including operational, administrative, financial reporting issues, and more.

Private equity’s management expertise can be highlighted through collaboration and identifying opportunity throughout a partnership, as well. We saw this highlighted in the Carlyle Group’s investment in AxleTech, as well. Working with Carlyle during its ownership, CEO Mary Petrovich led AxleTech’s foray into the fast-growing military sector, targeting its heavy-duty axle and suspension systems toward military vehicle manufacturers building heavy armored vehicles for American soldiers in Iraq and Afghanistan. “I’m very passionate about private equity,” says Petrovich, “because it’s not only made a difference in my life; it’s made a difference in the lives of 1,000 other employees of AxleTech’s.”

See the AxleTech video case study below, and click here for more examples of how companies across America benefit from private equity investment.

Psaros credits private equity’s operational and management expertise with their success. “We believe that superior investment returns are achieved by radically transforming the business and operations of companies, rather than playing with balance sheets,” he told the show’s hosts. “We see value where others do not, we buy right and we make businesses better.”

“We’ve been able to knock the cover off of the ball by investing in manufacturing and in industry, and we’re very proud of that,” said Psaros.

Pension fund commitments make up to 43 percent of overall private equity investment, making them essential to private equity’s ability to grow and create value for the companies in which they invest. In turn, pension funds benefit greatly from the superior returns delivered by private equity. At the end of the day, these returns help strengthen the retirement funds of policemen, fire fighters, teachers and more across all 50 states.

View our white board video below to learn more about who benefits from private equity investment.

“Some have characterized it as an unfair loophole that must be closed,” writes Hendrickson. “But from where I sit, any policy that ensures that capital can flow freely to businesses seeking to grow and create jobs is crucial. And that is why the current tax treatment of carried interest — as a capital gain — is entirely appropriate.”

Carried interest follows a basic tenant of partnership law, Hendrickson points out, that “individuals are taxed based on the character of the partnership’s profits, meaning that if the partnership receives a capital gain, so does the individual partner.”

Hendrickson highlights the importance of incentivizing risk-taking in order to grow and create more valuable businesses across the country.

“America has always rewarded those who invest capital and take risks to start or grow a business. Private-equity firms do this every day. There are more than 2,600 private-equity firms operating all across this country. Many are small and invest in local businesses with a few million dollars in sales or revenue. These businesses are starving for capital in today’s tough economy, and they crave investors who go beyond trading securities to provide intellectual capital and expertise to help them grow.”

To read the full piece, click here.

To learn more about carried interest, watch our latest Private Equity at Work white board video:

The goal of the ILPA Private Markets Benchmark, according to the organization, is “to accurately and consistently represent the global investible universe and asset class performance for institutional investors.” The benchmark includes more than 1,800 institutional funds.

These superior returns ultimately benefit private equity’s investors, including pension funds, university endowments and charitable organizations, which represent 61 percent of private equity investment.

PEGCC research released last November showed the significant outperformance of private equity investment for large public pension plans over long time horizons. The research found that private equity delivered an 8.8 percent median 10-year annualized return to large public pension plans, the highest of all other asset classes. These results show that private equity strengthens the retirement security of teachers, policemen, firefighters and in communities across the country.

“The thing about private equity is it is a competition for capital, and very much survival of the fittest. If we don’t do a great job growing our companies for the benefit of our investors, who are largely pension funds – firemen, teachers, policemen – then we don’t raise our next fund, and indeed that will be the end of a private equity fund.”

Hendrickson noted that private equity plays a role in the daily lives of many Americans, highlighting that, “One in 20 workers in the U.S. works for a private equity-backed company,” adding that, “the vast majority of studies out there show that as a governance model, private equity is actually a superior form of ownership.”

Hendrickson also discussed the possibility to broad base tax reform with the show’s hosts. While she noted that she did not think that eliminating loopholes was a necessarily bad thing, she stressed that carried interest is not what’s typically referred to as a ‘loophole,’ and that rather it’s just “misunderstood.”

“It is sweat equity, and since 1913 when the tax code was originally written, there has been this concept that both financial equity and sweat equity should be taxed at a lower rate.”

An example?

“You start a business and your dad gives you $10,000 to start it, you give him 50 percent of your company. And for the next 10 years you work really hard and you sell it for $5 million. Well, your dad gets capital gains, and so do you. You didn’t put in one penny, you just put in your labor, your creativity, your intellectual heft, and you got capital gains. That is what private equity firms do. That is what carry is.”

See the full video below.

In September 2006, Apollo and private equity firm Graham Partners acquired Berry Plastics. Since its acquisition, Berry Plastics has increased net sales to $4.8 billion for fiscal year 2012 from $1.2 billion in the fiscal year ended December 31, 2005. During this same time period, the Company also more than doubled its employee headcount. Berry Plastics currently serves more than 13,000 customers of all sizes across the globe.

The Evansville Courier & Press highlighted Berry’s growth:

“Berry has been in growth mode recently — it announced just last month it plans to add 115 jobs at its Evansville headquarters. Worldwide, the company has some 15,500 employees at 85 plant locations.

“Coats said he hoped the Berry visit would give him insights into the company’s success.

“It’s valuable for me to visit places that are growing,” the senator said.”

“Private equity’s investment provided Berry Plastics with resources to strategically expand our Company and invest in research and technology to foster the development of innovative new product solutions for our customers,” said Berry Plastics’ Chairman and CEO Jon Rich. “The expertise and vision private equity brought along with their capital investment was a key contributor in the successful growth of Berry Plastics.”

As part of an ongoing program to introduce lawmakers to private equity-backed businesses in their districts, the Private Equity Growth Capital Council arranged for Sen. Coats to meet Berry Plastics employees and tour its facility.

“Private equity owned companies can be found in every state and Congressional District in the United States, creating new jobs and reinvigorating the national economy,” said Steve Judge, PEGCC president and CEO. “Strengthening companies, like Berry Plastics, is the cornerstone of the private equity business model. Our effort to highlight successful investments provides the public, policy makers, and the media tangible examples of private equity investment driving economic activity and growth across U.S. economy.”

Carried interest is taxed at the capital gains rate because it is a profits interest on a long-term capital asset.  This policy encourages the risk taking that is required to save, start and grow companies. Changing the taxation of carried interest would upend a long-standing, successful policy that has helped America prosper for more than 100 years. It is commonplace in partnerships including private equity, venture capital, real estate partnerships and general business partnerships.

“Carried interest is commonly misunderstood in public discourse. Our newest whiteboard video demystifies the topic and answers questions about what carried interest really is, how it works and why it’s appropriately taxed at the capital gains rate,” said Steve Judge, president and CEO of the Private Equity Growth Capital Council. “Carried interest is an important part of the private equity business model – a model that is responsible for pumping hundreds of billions of dollars into the U.S. economy each year, while strengthening businesses for the long-term.”

The latest Issue Brief from the National Institute on Retirement Security (NIRS), titled “How Do Public Pensions Invest?” illustrates the growing commitment of public pension funds to private equity. Using data from Wilshire Consulting, NIRS shows that the percentage of assets allocated to private equity by state pensions rose from 3.9% in 2001 to 8.2% in 2011. The report notes that after the 2007-2008 financial crisis, larger pension funds reduced their exposure to public equities while increasing their exposure to alternative assets, such as private equity. Echoing these findings, The Wall Street Journal recently reported that larger public pensions with assets of $5 billion and greater allocated 12.7% of their portfolios to private equity in 2012.

What makes private equity so attractive to pension funds? One reason is superior investment returns – 8.8% annually over the last 10-years, compared to 3.7% for public equity. Another reason could be that larger commitments receive better returns. Using information from corporate and public pensions’ defined benefit plans, a recent academic study found that scale influences private equity returns. The researchers find that larger commitments to private equity produced relatively higher returns, driven by cost savings and better access to investment information.

Pension investment in private equity means greater retirement security for millions of Americans while strengthening and growing companies in all 50 states.