February 1, 2025
Private Equity Deals: Lessons in investing, dealmaking, and operations from private equity professionals
Ted Seides
In exploring the private equity landscape, Ted Seides' "Private Equity Deals" stands out as a masterful examination of value creation through practitioner interviews, offering invaluable insights into how PE firms identify and monetize opportunities through active management participation. Seides' work, complemented by Sachin Khajuria's "Two and Twenty," illuminates the sophisticated deal structures and alignment mechanisms that PE firms employ to generate returns. Both authors present compelling cases for PE's ability to transform businesses through operational improvements, strategic repositioning, and financial engineering. The methodical approach to value creation, particularly highlighted in Seides' work, demonstrates how PE firms blend traditional value investing principles with hands-on operational expertise.
A contrasting perspective emerges in Gretchen Morgenson's "These are the Plunderers" and Brendan Ballou's "Plunder," with Ballou's work providing particularly incisive criticism of the industry's structural flaws. These authors argue that PE's emphasis on financial engineering and debt often leads to deteriorating service levels and compromised long-term business health. Ballou's analysis is especially compelling, demonstrating how the industry's inherent structure, with its focus on short-term returns and excessive leverage, can create misaligned incentives that potentially harm portfolio companies, while firms shield themselves through sophisticated legal maneuvers. The tension between value creation and value extraction emerges as a central theme, raising important questions aboutthe industry's impact on businesses and stakeholders.