A few quotes from the private equity panel:
David Rubenstein, of Carlyle Group:
"If you’re a top quartile large buyout fund, you’re doing better than
anything else you can legally do with your money."
"Public-to-private deals are a relatively small part of what we do. 98%
of what we buy are private companies, or are subsidiaries of public companies.
The day-to-day work of what private equity is doing is buying private companies
and keeping them private."
"It was said when Goldman went public that that was the top of the market,
and it’s gone up 4 times since then. I wouldn’t be surprised if all the major
private equity firms were public 4 or 5 years from now. The principal concern
is whether we are going to favor the public shareholder over the private investor.
It’s too easy to say that you always will favor your private investor over your
public shareholder."
Thomas Lee, of Thomas H Lee Capital:
"When the economy goes bad, defaults will spike up from the 1% level up
into the 9% level."
"First Boston was the only public brokerage firm for 40 years. Many people
believed that brokerages couldn’t and shouldn’t go public. But it really proved
to be the way to go, the way to get the permanent capital."
David Bonderman, of Texas Pacific Group:
"Typically when you want to raise money and can’t, it’s a great time to
be investing. What’s unusual about the current cycle is that it’s been a great
time for both."
"Bigger companies are trading more cheaply than smaller companies, which
is quite unusual. The p/e ratios of the 50 largest US firms have declined by
about 70% over the past 5 years."
"At the moment, no matter how well we’re doing with a company, we must
sell. The difference between Warren Buffett and Steve Schwarzman is that Warren
Buffett never needs to pay taxes, because he never needs to sell anything."
"It’s a sure sign that the end is nigh when a quarter or a third of the
graduating class of Harvard Business School wants to work in private equity.
It is the flavor of the month. And it will continue as long as the salaries
that we are prepared to pay people are unreasonably high."
Leon Black, of Apollo Advisors:
"Going public is a great retention tool and a magnet for new talent. It’s
good to have a currency. If a number of large firms go public, they’ll use that
currency to acquire mid-size niche firms to fill in and make them much stronger
firms. It may be more efficient to buy a very good boutique using that currency,
rather than build. Clearly it’s a nice thing to monetize these cashflows, but
nobody’s selling more than 10% of their firm, and they’re locking themselves
up for 5-7 years. I wouldn’t count those chickens from a personal point of view.
The real negative is being public, being in the fishbowl. It’s having any small
shareholder sue you for whatever. I’m not sure any of us needs that."
"Do you really think I’m going to tell everyone at this table and everyone
in this room where I think the great opportunities are?"