Most consumers and even employees don't know their local hospital or retail store is PE-owned. This opacity shields PE executives from the public anger directed at more visible corporate leaders, allowing them to operate in the shadows.
Related Insights
During due diligence, the most revealing portfolio company reference checks involve asking CEOs leading questions. Frame inquiries to suggest the private equity sponsor is taking undue credit for successes. This tactic encourages frankness and uncovers the true dynamics of value creation and deal sourcing.
Private equity and venture capital funds create an illusion of stability by avoiding daily mark-to-market pricing. This "laundering of volatility" is a core reason companies stay private longer. It reveals a key, if artificial, benefit of private markets that new technologies like tokenization could disrupt.
Brian Chesky argues that large, late-stage private companies experience the downsides of public scrutiny without the benefits. There's an "insatiable desire" from outsiders to "get to the truth," creating more speculative pressure than the regulated transparency of being a public company.
The term 'private equity' replaced 'leveraged buyout' (LBO) after the LBO boom of the 1980s ended in a wave of high-profile bankruptcies. Howard Marks notes this name change was a deliberate marketing move to shed negative connotations and attract fresh capital to a reinvented industry.
Harvard's John Coates reveals that 'private' equity funds primarily invest public money from pensions and endowments. The 'private' label is a brilliant marketing strategy that allows them to avoid the public disclosure and scrutiny that should accompany managing millions of workers' savings.
Unlike venture capital, which relies on a few famous home runs, private equity success is built on a different model. It involves consistently executing "blocking and tackling" to achieve 3-4x returns on obscure industrial or service businesses that the public has never heard of.
The primary risk in private markets isn't necessarily financial loss, but rather informational disadvantage ('opacity') and the inability to pivot quickly ('illiquidity'). In contrast, public markets' main risk is short-term price volatility that can impact performance metrics. This highlights that each market type requires a fundamentally different risk management approach.
An experienced CFO communicating erratically at OpenAI is a symptom of a larger problem. The private market bubble allows companies to become critical to the economy without ever facing the discipline and transparency required of public entities, creating systemic risk.
PE acquisitions in healthcare impose rigid, cost-cutting operational models that strip physicians of their professional autonomy. This transforms them into cogs in a machine, driving burnout and fueling unionization efforts among doctors.
Post-acquisition by a private equity firm, financial visibility for product and line managers is often deliberately reduced. Pricing decisions are centralized at the corporate level, removing autonomy and making it impossible for product managers to strategically influence this critical function.
