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Private Equity at Work: When Wall Street Manages Main Street Paperback – May 1, 2014

ISBN-13: 978-0871540393 ISBN-10: 0871540398

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Editorial Reviews

From Booklist

Deregulation of the financial markets and investor thirst for higher profits have given an enormous boost to private equity financiers. They buy companies, issue huge debt, and reconfigure or dismantle them for profitable returns, sometimes at the expense of workers, suppliers, customers, and creditors. Yet because they are not publicly owned, private equity firms have little transparency or accountability. Economic scholars Appelbaum and Batt shine some light on the shadowy world of private equity and its high risk-reward profile. They clearly explain how private equity investments differ from publicly traded companies and explore their impact on the broader U.S. economy, particularly because so many pension funds are investors in private equity deals. They explore the impact of private equity deals on the labor market as more and more acquired companies are encouraged to reduce their workforces to give greater return to investors. Finally, Appelbaum and Batt recommend changes in public policy to reduce incentives that overburden companies with debt and to promote greater transparency in such deals. A dense but accessible look at a little-understood sector of the financial markets. --Vanessa Bush

About the Author

EILEEN APPELBAUM is senior economist at the Center for Economic and Policy Research, Washington, D.C. and Visiting Professor in the Management Department, University of Leicester, UK. ROSEMARY BATT is the Alice Hanson Cook Professor of Women and Work at the Industrial and Labor Relations School, Cornell University.
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Product Details

  • Paperback: 396 pages
  • Publisher: Russell Sage Foundation (May 1, 2014)
  • Language: English
  • ISBN-10: 0871540398
  • ISBN-13: 978-0871540393
  • Product Dimensions: 1 x 5.8 x 9 inches
  • Shipping Weight: 1.3 pounds (View shipping rates and policies)
  • Average Customer Review: 5.0 out of 5 stars  See all reviews (4 customer reviews)
  • Amazon Best Sellers Rank: #36,772 in Books (See Top 100 in Books)

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15 of 15 people found the following review helpful By JWS on May 24, 2014
Format: Kindle Edition Verified Purchase
I have first-hand experience as a manager in a portfolio company, and as friend and colleague of many others in the private equity ecosystem, both in PE firms and in operating companies. This book completely captures the business and economic realities of PE, and it does so with an informative and detailed historical perspective that frames recent economic (and social) developments well. First and foremost, it's a great book about PE, but it's also a book about the late 20th century rise of finance and new forms of financial engineering as a social force displacing stakeholders by shareholders. Everything in this book rang true to me.
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9 of 10 people found the following review helpful By Serge J. Van Steenkiste on June 24, 2014
Format: Paperback Verified Purchase
Eileen Appelbaum and Rosemary Batt show with much conviction how much influence private equity (PE) firms have acquired through their ownership and control of Main Street companies across the US economy. Ms. Appelbaum and Ms. Batt also cover PE firms operating abroad whenever appropriate for the understanding of their examination of PE.

To their credit, Ms. Appelbaum and Ms. Batt don't characterize all PE firms as uniformly harmful to the acquired companies and their stakeholders. Some PE firms - especially those that buy and sell small or mid-market companies with enterprise values lower than $300 million - may undertake profit-seeking activities by creating value and increasing wealth not just for themselves, but also for the acquired companies and their stakeholders.

Unfortunately, all too often PE firms undertake rent-seeking activities that maximize their own returns while putting operating companies and their stakeholders at risk. Both authors examine financial engineering activities such as high leverage, the sale of assets, tax arbitrage, dividend recapitalizations, and the use of bankruptcy proceedings under rent-seeking activities.

Ms. Appelbaum and Ms. Batt call for thirteen policies to rein in the PE excesses that they documented in the book under review:

1) Curb private equity compensation to reduce moral hazard and risky behavior. The current legislation on this subject does not have real teeth to reduce the incentives for excessive risk-taking for financial institutions, including PE firms.
2) End preferential tax treatment of carried interest. Both authors argue that the general partners of PE firms are similar to real estate developers and should be taxed accordingly.
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Format: Paperback
For the past thirty years, I have been a portfolio manager specialized in leveraged loans. Many of the private equity deals which are the subject of this book have either been in my portfolio or passed by my desk.
These amazing authors describe with remarkable accuracy what is ultimately a damning set of truths about the predominant consequences of private equity, and the uneven legal circumstances which make these activities possible as they are. It is the most impressive, fair and comprehensive book I have ever seen on the topic to date.
The writing is superbly clear and the tone truly even-handed, accessible to any intelligent reader, i suspect, but not dumbed down or oversimplified so that it distorts or would bore the knowledgable professional. A mix of case study, evidence explication and policy discussion makes this book both a good read for such a dense, serious topic, and, in my opinion, spectacularly successful.
Since private equity is a huge force in our world, even people who think they don't care about such a dry-sounding subject as private equity would be wise to pay attention to this book.
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Format: Kindle Edition Verified Purchase
Excellent discussion of how private equity works; how it affects workers; how workers and their unions respond and of the role of pension funds as investors in private equity.
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