A team sport: PE and personalities

How many of you have personally out on a limb for the sake of a deal you believed in? Over the years, I have been told of so many deals that were years in making as the GPs cultivated friendships with business owners and showed them how partnerships with private equity could be mutually beneficial. Even in auctions, the relationship between buyer and seller is a crucial factor.

However, it has been observed to me recently that there are fewer "personalities" in the private equity space than before, and that the industry has lost some of its highly opinionated and immensely quotable professionals who are seen at conferences and read about in media. While I don't agree with the first part about personalities, I think there is some truth in the second.

First, many of the more successful private equity firms are much larger nowadays and employ a larger number of staff. Many of these professionals come from other parts of the financial world; parts in people are well-known for keeping things close to the vest. Indeed, in our experience as conference organizers, speakers with such backgrounds are usually very thoughtful and eloquent but rarely delve into the controversial.

Corporate cultures aside, that's probably the right thing to do in the era of social media where it is all too easy for words to be taken out of context, creating unwanted trouble for employers and employees.

However, what's more interesting - or frustrating - is that some people correlate outward displays of emotion with actual investment success. I would say that is that it certainly much harder now for many to emulate the successes of the past, in particular building firms with their names on the door. But it is by no means the case that the top GPs are less competent or entrepreneurial. Rather, the industry has evolved and the rewards are split more evenly than before, perhaps because there is a much larger pie.

In this sense, comparisons between past and present are unfair. Top firms today are built on teams of professionals that include risk managers, legal counsel, corporate communications executives, and so on - not just investment professionals, although they remain the core to these GPs' success. Yes, private equity is and will continue to be a people's business, but these people aren't by themselves anymore.

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