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40 of 40 people found the following review helpful
5.0 out of 5 stars Another Book Review from the Aleph Blog
Private equity is ill-understood by the general public because it is private. They don't have to file statements with the SEC, all they have to do is inform their limited partners on how they are doing.

Jason Kelly gives us a neutral view of what is going on in private equity. I think he is neutral, because he does not come across as a fan or a critic...
Published 22 months ago by David Merkel

versus
33 of 37 people found the following review helpful
2.0 out of 5 stars Lacking any substance
Bought the book based on its good reviews to date. However, found very little in terms of substance or new information on any of the private equity firms or the industry overall. Author touches briefly on each of the major players in their industry, but he does not provide any insight or details on the background and experience of the founders, their benchmark deals, or...
Published 22 months ago by Jairo R. Navarro


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40 of 40 people found the following review helpful
5.0 out of 5 stars Another Book Review from the Aleph Blog, September 7, 2012
By 
David Merkel "Aleph Blog" (Ellicott City, MD United States) - See all my reviews
(REAL NAME)   
This review is from: The New Tycoons: Inside the Trillion Dollar Private Equity Industry That Owns Everything (Hardcover)
Private equity is ill-understood by the general public because it is private. They don't have to file statements with the SEC, all they have to do is inform their limited partners on how they are doing.

Jason Kelly gives us a neutral view of what is going on in private equity. I think he is neutral, because he does not come across as a fan or a critic. Personally, I think that is hard to do with private equity, because 1) it is easy for some to become amazed at the success of some incredibly wealthy and clever businessmen, or 2) it is easy to take offense at these shadowy capitalists that have produced bankruptcies, fired many people, and have been very clever at using the tax code to pay minimal taxes.

Both of these views are caricatures and the truth does not lie in-between but embraces both views. Indeed, in many cases, jobs have been preserved or created through private ownership of firms. Many firms might have died without private equity restructuring the company, leading to the loss of all jobs.

Jason Kelly takes you through all aspects of private equity:

Fundraising
Leverage
Dealmaking
Operations
Exiting (Selling)

He also introduces you to all of the major private equity shops, and their leadership.

One thing the author highlights in the book is the pervasiveness of private equity. He notes how many businesses are managed by private equity. In general, these are businesses with steady cash flows that can service the debt that the private equity funds borrowed to buy them.

Some private equity firms are passive, and don't try to improve operations. Others make a great effort to grow the companies, hiring new people in the process, and taking risks to create a better company. It depends on the philosophy of the private equity owners.

The book does note the favored tax status of carried interest, but takes the position that the private equity investors are following the law, and that they will follow the law should it be changed. (My simple idea is that interest should not be taxed, or be a tax deduction.)

The book does note trends:

Private equity is becoming more public, as more large private equity firms go public.
Complexity inside private equity firms is growing as they broaden the scope of services that they provide.
The owner/founders are moving on, and a new generation of management is taking the reins.
Returns may be falling as private equity gets larger.

In all, a good book, but one that may leave partisans unsatisfied. It does not demonize or engage in hagiography.

Quibbles

None.

Who would benefit from this book: Anyone wanting to learn about private equity would benefit from this book.
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33 of 37 people found the following review helpful
2.0 out of 5 stars Lacking any substance, September 26, 2012
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Bought the book based on its good reviews to date. However, found very little in terms of substance or new information on any of the private equity firms or the industry overall. Author touches briefly on each of the major players in their industry, but he does not provide any insight or details on the background and experience of the founders, their benchmark deals, or how they got to the top. In addition, I expected to see a bit of "Barbarians at the Gate" type deal insight, and was instead bored by what seemed to be essay reflections of the value of the industry, its impact in society and employment. If you are looking for a very top level and general view on the industry the book does its job, but in terms of getting "inside" the industry, or learning anything new about the "new tycoons", I think you will be very disappointed.
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8 of 8 people found the following review helpful
5.0 out of 5 stars Riveting - marries the stories of personal motivations and talents of the 'tycoons' with the business realities, September 21, 2012
This is one of those rare books which is both very informative and very entertaining. It manages to detail the ups and downs of the big-ticket corporate world, inter-weaving the real-life personalities of those involved. It reminds us that the basics of good business are common in all industries and that good management is good management. It also reminds us of the personal cost paid by those willing to roll the very big dice! This was a pleasure to read and gave me many things to think about for a long time.
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12 of 15 people found the following review helpful
2.0 out of 5 stars Disappointing, November 13, 2012
By 
James R. Maclean (Seattle, WA United States) - See all my reviews
(REAL NAME)   
This review is from: The New Tycoons: Inside the Trillion Dollar Private Equity Industry That Owns Everything (Hardcover)
I read the book with a few disclaimers already understood in advance: the author, a fairly newish journalist with Bloomberg, needs to cultivate relationships with the top figures in PE. So he needs to avoid printing anything about anyone that might possibly be offensive to that person...unless that person happens to be, say, a critic of the PE sector.

Likewise, this book will mainly cover the PE sector from the point of view of investors, especially investors who are interested in the newly-available shares of the largest PE firms (some of whom only just went public). And finally, there are some business press conventions about social issues that cannot be transgressed: for example, all members of labor unions are avatars of Sergey Nechayev and Homer Simpson. There are many other examples.

(All right, one point worth noting: PE partnerships are typically very well-connected: indeed, they make Goldman Sachs look like a shut-in [1], with partnerships combining the most powerful people in Washington with the most powerful people on Wall Street or Dubai. Do PE partners have decisive power over arcane legislation regarding recondite financial practices? Yes. Ideally, a financier pushes the laws in order to make money, and legislators make laws to make sure the boundaries imposed by them--up against which the financier pushes--do the job of protecting other parts of the economic system. No one expects the financier to pay more tax than required by law. But it becomes a problem if the financier can have a loyal consigliere write those laws, which is increasingly the case.)

(Bearing this in mind, Kelly often mentions qualms PE firms have about cutting swathes of total radioactive desolation through US capitalism--the qualms about it, not the hesitation to do it, which is imaginary--as if this were some far out freaky form of corporate social responsibility. It's like saying of Jeffery Dahmer, "I don't think lesser mortals would have felt the remorse his great soul did over the pain he believed he caused others.")

Surprisingly, I'm not rebuking Kelly for his relentless polishing of the moral turd that is PE. I regret that he has to do it to provide readers with access to the top leadership of the financial sector, but he does and I do sympathize. Besides, as I said above, I'm assuming readers of this book will MOSTLY care about PE as investors, whether in companies recently re-sold to the public or in the PE firms themselves. In that case, a reasonable amount of disclosure about the performance of the PE firms' portfolios, and perhaps a discussion of how they are evolving, will be very valuable to readers--even if it is spun favorably. Likewise, Kelly's position in a decidedly pro-management milieu makes him an attractive interlocutor for interviews divulging the goals and frustrations of the management.

But the interviews add almost no meaningful value. Managers say things that are not only vapid, but worse, sound like a pull-quote from the current management book topping the bestseller charts. Again, flatter these guys as much as you like, but don't waste our time with vacuous flapdoodle run through the PE firms' counsel and PR consultants.

Likewise, the descriptions of deals performed by the individual PE firms are useless. Take the 2007 takeover of TXU by private equity firms KKR, TPG, and Goldman Sachs. I had never heard of TXU, and figured that eventually Kelly would--in his peripatetic way--get around to explaining that it was a $45 billion utility company with (at the time) integrated generation, distribution, and retailing. Instead, this was the financial equivalent of Hitler's invasion of the USSR, and accorded much less detail in the book than the art collections of Henry Kravis' wife (that's Kravis, as in KKR). TXU was "restructured" for greater ease of stripping value. Kelly mentions that the deal was an unfortunate disappointment that no one could have foreseen. Again, imagine describing Operation Barbarossa like that and you see the problem: the TXU deal lost 95% of its value.

(I know what you're thinking: 2008 Global Financial Crisis was to blame, which sure sounds plausible until you realize TXU/EFH peaked in value in 2009. That's right, this was a separate financial catastrophe.)

Kelly broaches the complaints that critics of the PE sector have made over the years, but with the [admirable] exception of tax treatment of interest carry, he always defends the rules that favor PE. The argument he makes is that, since most parties affected by PE are on "both sides of the trade" no one has any business complaining, and no genuine conflicts of interest exist. For example, PE firms make profits and profits mean jobs, so it's all right for PE firms to destroy jobs by stripping companies. Likewise, lots of pensions are backed by limited partnerships in PE (I bet you never even thought of that!).

I never made any sense of his defense of the fees PE firms charge the companies they take over; critics say it misaligns the interests of management and ownership, which seems a bit like saying ebola is a BAD thing. He denies this using an argument I've noticed is now endemic to our society: You can't say doing x is wrong, because if I didn't do x, I wouldn't be able to get y. QED, your notion of morality is mistaken. Kelly's version of this is that, if PE firms didn't plunder their targets into hopeless basket cases, they couldn't do any deals (pp.144-145). I recommend that readers just skim over passages like these, on the grounds that they were the price of admission that Jason Kelly was obligated to pay for access to these new tycoons.
________________________________________________

(1) UPDATE (30 July 2013): "they make Goldman Sachs look like a shut-in" is a joke; of course Goldman Sachs has a private equity division, GS Capital Partners (founded 1986). I was reminded of the existence of this division soon after writing this review. For a ranking of PE firms by funds raised, see Private Equity International, "Private Equity International's exclusive annual ranking of the 300 largest private equity firms in the world," which is updated annually. For some reason, the name for Goldman Sach's PE division is "principle investment areas." Kelly mentions Goldman Sach's "private equity arm" on p.62-63 (as syndicate members in the Dollar General Deal with KKR), but it must have escaped my attention.
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8 of 10 people found the following review helpful
5.0 out of 5 stars absolute must read, September 6, 2012
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Whether you're in business or not, you will like this book. The author's description of the individuals in the book reads as though characters in a novel. These powerful organizations and individuals have such a profound influence on the general populace, it's amazing. The access that the author had to these organizations is seldom afforded others. Everyone should read this book to build a knowledge base on who these people and organizations are.
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4 of 5 people found the following review helpful
2.0 out of 5 stars Pretty dense, April 9, 2013
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This review is from: The New Tycoons: Inside the Trillion Dollar Private Equity Industry That Owns Everything (Hardcover)
Its a dense subject but good storytelling could have made it interesting. Instead, the author really makes no attemp to even make this book interesting. I read about 4-6 business books a month and I couldn't get through this one.
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1 of 1 people found the following review helpful
2.0 out of 5 stars I want my money back, March 13, 2014
If you want a book that is informative in the first two chapters and then goes on and on about why someone will or wont eat a meatball sub, then this is for you. If you forgot how to find a restaurant and you want an in depth aesthic description (with address) of every nice restaruant in Manhattan then this book is for you. If you want to know the childhood story over every person mentioned and cataloguing of every piece of artwork that hung in their office, then you found your book. The author clearly got caught up in demonstrating his prowess for creative writing and neglected any substance relevant to private equity.
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1 of 1 people found the following review helpful
5.0 out of 5 stars Best intro into PE world, August 6, 2013
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This review is from: The New Tycoons: Inside the Trillion Dollar Private Equity Industry That Owns Everything (Hardcover)
Very detailed review of the leading private equity firms and their businesses.
Especially I liked analysis of success stories of founders of Blackstone, KKR, TPG and Carlyle. They are very dissimilar, but at the same time all great characters.
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1 of 1 people found the following review helpful
3.0 out of 5 stars Decent read, July 18, 2013
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This was an interesting book that shed much light onto the private equity industry. While it jumped around between firms, the details are fascinating and the points made are both interesting and well delivered.
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1 of 1 people found the following review helpful
4.0 out of 5 stars Follow the Money, June 23, 2013
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This review is from: The New Tycoons: Inside the Trillion Dollar Private Equity Industry That Owns Everything (Hardcover)
I first heard about `The New Tycoons' via Bloomberg radio. Having at least a tangential familiarity with the private equity business I was curious about the historical aspects of the business and the sometimes colorful background of the key players, not to mention how those huge sums of money were derived.

All of these items are well documented here as is the way PE grew (and continues to grow) in the current market environment - the latter not nearly as robust as its seminal formative years. Not surprisingly, the founders of PE were born largely out of investment banking. Too, the astronomical fortunes that have been made came at a game of high risk / high reward, but also exacting fees both before any profits were distributed to investors and large internal rates-of-return (IRR) payable directly to the PE companies. To some extent this business model has changed as larger pension funds and endowments have moved to take the ROI role internal.

Blackstone (Schwarzman), KKR (Kravis), Carlisle (Rubenstein), Bain (Romney), TPG (Bonderman) and a host of others are chronicled in a clear and concise way. Make no mistake. These guys (there are few if any women among the founders of PE) worked hard. Not a lot of heavy lifting, but more sweat equity involving lots of global travel, relationship development and time away from family and friends.

There are few areas in our daily lives that remain untouched by PE. Its reach is profound and its business decisions are capable of having a ripple effect across economies, industries, communities and families. In the interest of full disclosure several of the companies in my personal investment portfolio are partially owned by PE. I also worked several years for a company jointly owned by two PE players.

Like so many things in life and business including PE timing and opportunity are everything. I highly recommend this book for a reader with an interest in understanding more about the private equity business.
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The New Tycoons: Inside the Trillion Dollar Private Equity Industry That Owns Everything
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