Today, I met with a friend who is involved in a business that provides background checks on employees. He said the business is doing well -- except for the Fortune 500 customers. Why? Perhaps these companies are cutting back jobs.Could that be the result of private equity? After all, with large amounts of capital, private equity firms are targeting mega companies like TXU Corp. (NYSE: TXU) and First Data Corp. (NYSE: FDC). What's more, private equity deals often involve job cuts.
Well, Congress is thinking about these issues and even had a hearing yesterday.
The president of SEIU (Service Employees International Union), Andy Stern, made a presentation against private equity. He thinks that most deals are too risky and are mostly quick flips -- which leads to greater income inequality.
He makes the following analogy: With the $4.4 billion in fees for the 10 largest buyout deals, Congress could provided health plans for 1 million workers.
You can get more information at BehindTheBuyouts.org.
As for the private equity point of view, there was a presentation from Douglas Lowenstein. He operates the newly formed association called the Private Equity Council.
His argument? Well, it's that the high returns generated from private equity firms ultimately benefit Americans, through pension funds, insurance companies and college funds. Private equity has also helped improve companies like Dunkin' Donuts, Toys R Us, Domino's Pizza (NYSE: DPZ), MGM Studios, and J. Crew Group (NYSE: JCG).
No doubt, private equity is becoming a political issue. Although, I think it's still not a "hot button" yet. But if we start to see more and more layoffs, it certainly could be.
Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.
