Private Equity Firms And A Very Bad Press
The last few weeks have seen the financial press, the government and seemingly every tax expert n the country turn against the Private Equity firms. These aggressive investment firms have taken some really heavy criticism in recent times, but is it justified and is it true?
For those who are not sure what a Private Equity firm does, they are investment vehicles for both wealthy individuals and corporate entities. Their funds are pooled together and investments sought out by some of the toughest business people you will ever come across. They have a reputation for being very hands on, very aggressive and have often been accused of asset stripping. But is it all true?
There is no doubt that many of the bigger Private Equity houses have often hit the headlines for the wrong reasons, whether it be squeezing every penny out of a company, reducing employment numbers or just making “too much moneyâ€. There has been much said of the 10% tax rate which many top executives take advantage of - so surely the criticism is justified? Well not always…..
The facts are these investment groups make massive personal investments into new ventures, taking over an old business or setting up a new one. Every transaction which they take on offers risk, and for every successful deal hitting the headlines, there will be another 5 or 6 going to the wall. These companies do not always make money on their investments, true they play a hard game, but the fact they are able to pick and choose their investments shows how many companies are not running at maximum efficiency.
As many Private Equity executives are paid on performance, they are able to cash in many of their shares in these ventures, hence the 10% tax rate, which is a special consideration because of the high risks they take and the effort they put in. Without Private Equity firms there would be a lot more companies going to the wall, and many more jobs lost.
You must be logged in to post a comment.