Wednesday, August 15, 2007

Leadership menopause

The private equity industry is accused of poaching some of the best brains from the mainstream businesses. Corporate luminaries (Jack Welch of GE, Lou Gerstner of IBM, Jacques Nassar of Ford to name a few) have bolted in droves for private equity, the freewheeling world where investors buy slumping companies and try to turn them around to sell or take public, risking billions of dollars in the process.

All brilliant minds and high performers, no doubt. Their track records speak for them. Profligacy has never been their virtue and all of them balked at cost spirals. I often wonder how they approve of the clearly unsustainable leverage deals brokered by the private equity firms they end up working for, to finance bulge bracket acquisitions. Steven Pearlstein of Washington Post has this eye opener on the recent Avaya deal by Texas Pacific (where Millard S. "Mickey" Drexler, ex-CEO of Gaps Inc. works)

How can they fling caution to winds as soon as they switch to private equity? Has it got to do with the new found freedom from Sarbanes Oxley going to their head…? Or do they undergo a hormonal imbalance during the autumn of their careers ?

But come to think of it, Blackstone boss Schwarzman sure had that close call with change of life. How else do you explain his selling a stake to China, awful hurry to take Blackstone public and indulging like there are no tomorrows only to invite that Congressional tax slap…

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