Private equity ‘should be renamed growth capital’

Nelson argued that the current description for the industry doesn’t correlate with the reality of what firms in the asset class do. “I don’t like the name,” he said. “There’s nothing about it that lines up with the fact that private equity is a positive force for change.”

According to Nelson, private equity is not just an “alternative equity class to conventional forces” but rather an area where stakeholders have resources and influence over companies and a focus on growing long-term value. “That strikes me as a good thing around the world,” he added, recalling when Providence first invested in the German market they had been viewed as “locusts”. The firm was later perceived more positively after backing local business and increasing employment and broadband subscription numbers.

He pointed out that governments and the wider population don’t have the same perspective as industry practitioners who understand the sector, and that a change in terminology could even lead to less stringent regulation.

The Carlyle Group’s David Rubenstein, meanwhile, highlighted how the term private equity is inaccurate in that deals aren’t realized in a private setting and many PE firms and portfolio companies aren’t privately-owned either.

“I expect something will come along that will make the industry have a different name over the next couple of years,” he predicted. When the asset class first started, he added, transactions were called "bootstrap" deals, a term which was later changed to "leveraged buyouts," which was in turn changed to "management buyouts," and latterly, "private equity." 

The Investment Summit forms part of the AVCJ Forum 2011 and Private Equity Week - Asia. It continues Thursday. For more information, please visit http://www.avcjforum.com. You can also follow events as they unfold via Twitter @AVCJ (hashtag #avcj and #avcjforum). 

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• Topics
• Regulation
• The Carlyle Group
• Providence Equity Partners
• AVCJ Private Equity & Venture Forum