Can consolidation create sustainable long-term value, or will it prove seductive but, ultimately, disappointing to shareholders, employees, customers, and management alike?
If private equity makes a killing, Congress should require full disclosure.
that takeover firms should disclose industrial plans for the companies they buy and reveal more about how they would finance their deals.
“Employees have a legitimate concern that excess debt could undermine job security,” the editorial states.
The authors suggest also that the private-equity industry should reveal more about how it makes money:
“Outsiders worry whether returns are really the result of smart decisions and hard work or the product of rising markets, leverage, and favorable taxes.”
Congress ought to step in and make such disclosures mandatory to federal and state regulators. Like the Food and Drug Administration, regulators could ensure that the “secret sauce”—in this case private equity’s financial engineering—is safe for consumption, without giving the formula away to competitors.
Only in this way could utilities be sure that a step forward with private equity isn’t a step back toward a volatile past.