David Bonderman, the founder of US buyout firm Texas Pacific Group, has come out fighting on behalf of an industry under fire most recently from the UK Financial Services Authority. The regulator which this week said the collapse of a large buyout is “inevitable.”
According to a report in the Financial Times, a UK daily paper, he defended the industry’s reputation against claims of profiteering, saying: “Private equity has been demonised but nobody is trying to get rich out of fees. Fees are like a dividend payment to buyout firms, rather like IBM would pay a dividend to its shareholders”.
Texas Pacific is nearing a close on its latest mega fund and Bonderman said this was just the beginning, despite concerns the buyout firms had yet to demonstrate they could find a home for the vast amount of capital.
Bonderman said to the Financial Times: “There is no sense that fund raising has hit a ceiling. All the big guys believe that they can handle more funds. If Warren Buffett can, why can’t Henry Kravis?”
Bonderman also made a case for the buyout firms as more responsible corporate citizens than their industrial rivals, which were often painted in a better light because their interests were domestic.
He was clearly mindful of the locust debate in Germany last year when he said buyouts had led to just 6,000 job losses in Germany compared with the combined 100,000 workers laid off recently by Volkswagen, Siemens and Deutsche Bank. “That hasn’t made the papers because they speak better German than we do,” he said.
On a separate issue Bonderman predicted a consolidation of buyout power in Asia in the hands of few international firms: “We’re going to see in Asia what we’ve seen in Europe and the States. At the end of the day there will be no local firms.”
He said his prediction is based on the “explosion” in the size of deals in the region, as well as the better access to transactions and superior investment returns generated by the biggest buyout firms.
“It’s going to be a global market dominated by the same global players who dominate in America and Europe, with the possible exception of internal Chinese-sponsored funds, and maybe one or two players in India,” Bonderman said.