“Our experience has been that private equity buyouts provide the opportunity to incentivise and lead labour in much more efficient and innovative ways, rather than simply taking an axe to the workforce. The staggering inefficiencies that are inherent in many companies today regardless of size and maturity, and the opportunity to point a company in a new direction is where private equity really can add value.”
Who said it: Alex Barr is manager of the Aberdeen Private Equity Fund
In Context: In an editorial in the FT the rising stock market and its impact on PE is discussed. On the one hand, it improves the exit strategy for investors as the IPO window opens and appetite for shares increases. It also enables higher valuations of portfolio companies on the books using data from comparable publicly traded companies. On the other hand, a rising stock market means it becomes more difficult to do take-privates because prices are higher.
Barr writes in the second half points to other sources of dealflow for PE investors, making the case that a lot of value can be created by improving inefficiencies. He says that it is not the same as job-slashing and says that PE’s reputation for that is unjustified. (Image source: Aberdeen PE website)
Where we found it: Financial Times