August 03, 2012
In a recent CNBC.com op-ed, Jay Jordan, chairman and managing principal of The Jordan Company, LP, notes an increase in recent media coverage mischaracterizing the role that private equity plays in the economy, and sets out to address six “common misperceptions about the PE industry.”
First and foremost, Jordan points out that only a small number of private equity firms specialize in turning around struggling businesses while the majority of firms, “focus on acquiring profitable growing middle market companies that are leaders in their respective industries.” Jordan also points out that while PE firms are profit-driven businesses, their goal is always to grow the businesses in which they invest, and in return, generate returns for their investors, including pensions, university endowments and charitable organizations.
There are several positive functions that private equity provides to their portfolio companies, including, “encouraging best practices in all functional areas, improving operations, implementing lean manufacturing, providing access to capital for working capital and capital equipment, helping with international expansion, assisting with smaller add-on acquisitions and joint ventures.” And while private equity is by nature just that – private – Jordan recognizes a need for firms to better and more openly communicate the important contributions that they make to the American economy. At the end of the day, he notes, “PE firms… invest in companies on Main Street and have a track record of helping good companies grow even faster. “
Read the full op-ed here.
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