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What is in a Name? Private Equity Industry Considers Label Change

Entering 2012, expectations were high for the private equity industry. Firms were finally recovering from the 2008 financial meltdown and private equity executives were confident that transactions would only continue to increase. ((Hillary Canada, Survey Says: Glass-Half-Full Outlook For 1H 2012, Wall Street Journal Private Equity Beat (May 1, 2012, 7:08 PM), To top it off, one of the field’s very own had a legitimate chance to become our nation’s next president. Despite this favorable outlook, 2012 resulted in such damage to private equity’s image that some are now insisting the industry needs a complete rebranding. ((William Alden, Rethinking the Term ‘Private Equity’, New York Times Dealbook (Jan. 31, 2013, 1:41 PM),; Shasha Dai, Should Private Equity Industry Change Its Name?, Wall Street Journal Private Equity Beat (Feb. 1, 2013, 3:35 PM),

While the private equity industry has shouldered the blame for economic problems in the past, public criticism rose to unprecedented levels in the past year. The most widespread vilification occurred during the presidential election, when both Democrat and Republican rivals of candidate Mitt Romney spent millions attacking his private equity background. ((Tomio Geron, The Mitt Romney Effect on Private Equity and Venture Capital, Forbes (Sept. 21, 2012), Around the same time, a federal class action was filed accusing some of the nation’s largest private equity firms of a wide conspiracy to rig deal prices. ((Don Jeffrey & Devin Banerjee, Blackstone, KKR, Bain, Accused of Agreeing Not to Compete, Bloomberg (Oct. 11, 2012), Considering the very negative popular conception of private equity following these events, it was not surprising when the Security and Exchange Commission’s enforcement division continued the assault by announcing that a regulatory heavy-hand would soon be coming down on the industry. ((See Bruce Karpati, Chief, SEC Enforcement Division’s Asset Management Unit, Private Equity Enforcement Concerns at Private Equity International Conference (Jan. 23, 2013) (transcript available at

Historically, private equity firms have not found this type of publicity overly concerning. They have had little need or incentive to uphold their image because they have operated completely in the private sector. ((D.M. Levine, Carlyle and Oaktree Are Latest Private Equity Firms Expected to Go Public, The Huffington Post (Apr. 11, 2012), public_n_1417734.html.)) However, with many of the big firms going public in recent years, high-level private equity executives now believe that the industry must be “widely trusted” and maintain a “pristine reputation.” ((Alden, supra note 2.))

Looking to save face, some private equity practitioners have proposed rethinking the name “private equity.” ((Id.; Dai, supra note 2.)) Blackstone Group President Tony James dislikes the label’s clandestine connotation and feels that it “subliminally sends the wrong message.” ((Dai, supra note 2.)) Others argue for change by citing the fact that the industry is no longer truly “private,” as it is now regulated by government agencies. ((See id.))

The corporate world has seen this type of makeover before. In the 1980s, “corporate raiders” became symbols of Wall Street greed for their tendency to conduct hostile takeovers of large companies. When legal countermeasures were put into place to thwart these attacks, corporate raiders revised their approach and adopted a more politically correct name: “activist shareholders.” ((Bob Moon, Corporate Raiders Morph Into Nice(r) Guys, American Public Media Marketplace (Nov. 26, 2012), Since the re-characterization, activist shareholders have enjoyed success despite continuing to shake up companies like the corporate raiders before them. ((See id.))

But still, in order for a name change to work, the industry must settle on an appropriate moniker. Noting how Blackstone provides its limited partners with widespread access to its portfolio companies’ financials, James suggests that the name should be changed to “clarity equity.” ((Dai, supra note 2.))

Other ideas such as “ long term capital providers” and “opportunity capital” suggest positivity and communicate an actual function of these firms. ((See id.))

While altering a label has helped groups repair their image in the past, it is a difficult process that is by no means guaranteed to succeed. An effective approach would supplement the name change with an effort to better educate the public on the benefits of the industry. Regardless of what these investors call themselves, their increasingly important reputation is unlikely to improve significantly unless they first make some attempt to eliminate the negativity surrounding the term “private equity.”

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