Private equity firms that have gone public – like The Blackstone Group, Kohlberg Kravis Roberts, and, while still in the IPO process, The Carlyle Group – have learned one of the challenges is the obligation to disclose the inner workings of formerly fiercely private enterprises. That in turn can sometimes lead to uncomfortable media attention – and even further misperception – of an industry that, in many places around the world, is still struggling to be trusted and understood by policymakers and the public.
Take Carlyle, for instance: one of its recent filings detailed a loan it had repaid to Abu Dhabi-backed investment fund Mubadala, a minority owner in the firm. The loan, it turns out, was used in part to pay its founders nearly $400 million, which prompted not-terribly-flattering “pre-IPO pay day”-type news coverage. While a few LPs questioned the loan, most sources PEM queried said Carlyle’s actions seemed neither uncommon nor particularly sensational. But it clearly caused Carlyle to be at the centre of some attention we reckon it wasn’t seeking.
It’s expected, you might argue, that these types of large, publicly listed asset management groups face more scrutiny; but most private equity firms these days, publicly listed or not, are also preparing to be subject to greater analysis as regulators around the world ramp up disclosure and transparency rules. It’s unclear how much of the reams of information regulators plan on collecting will be made public under various incoming legislation, but current affairs such as the continuing controversy over carry tax rates and Mitt Romney's presidential run are also sure to keep the industry in the spotlight, most insiders say.
It’s important therefore that even the smallest of firms evaluate their actions and statements not just with regulatory and compliance check boxes in mind, but considering public perception, too. For while it’s true that private equity hasn’t really been “private” for some time, it’s certainly never been more public.