FIRST ROUND

There has been a proliferation of blogs that cover venture capital and private equity, but we can only think of two that are anonymous. Earlier this year, we profiled “Slave Girl”, an unidentified admin somewhere in Silicon Valley who regularly waxes profane on the peccadilloes of venture capitalists. This month, we bring you excerpts of an interview with “ep”, a vice president at an unidentified buyout firm in New York. His/her blog, found at equityprivate.typepad.com/ep/, waxes sardonic on topics ranging from the recent KKR listing to “Debt Bitch”, an unidentified finance professional who ep works with on deals.

Not surprisingly, the interview was conducted via a “hushmail” account:

PEI: Does your boss know you have a blog?

The egos of many in the business are so massive that they have their own gravity wells. You can feel yourself tracking the curvature of the space around their offices when they are at their desk. Only the gods of private equity themselves can rescue you from the event horizon of a partner. Not many are particularly interested in being told “how it is”

ep: If so he hasn't said anything. I did recently get an email from a colleague who pointed me to [my blog] and marveled at how much like our firm it was, not knowing why. I feel like the serial killer in the quiet town when the next door neighbor jokes, “hey, that police sketch looks a lot like you! Woah! Wouldn't that be something?”

PEI: Are private equity professionals starved for candid commentary?

ep: Certainly, some are. But the egos of many in the business are so massive that they have their own gravity wells. You can feel yourself tracking the curvature of the space around their offices when they are at their desk. Only the gods of private equity themselves can rescue you from the event horizon of a partner. Not many are particularly interested in being told “how it is”.

PEI: What has been your most popular post?

ep: That depends on your criteria. When it comes to search engines, anything I put a photo of Paris Hilton next to seems to get a lot of attention. Surprise, surprise. Other than that, the KKR Amsterdam IPO analysis series is probably the grand prize winner, at least based on the number of emails I get asking me to violate various regulations or forward the prospectus.

PEI: What post got you the most negative feedback?

ep: I get a lot of business students sending emails correcting this or that calculation or assumption. What is interesting is that they tend to be wrong. I think I've taught more MBA students how to use IRR and xIRR in Excel than have Harvard, Stanford and Wharton.

I get any number of emails written around the premise that buyouts are an awful and useless thing, that the compensation structure is backward and that LBOs add no value of any kind. Usually, this flurry coincides directly with related comments by Warren Buffett or a member of the German government.

PEI: What are some of the most sacred cows in private equity?

ep: The 2/20 percent compensation structure, without a doubt, is the forbidden holy city of the industry. You are only allowed to walk into the 2/20 percent discussion if you are already a convert. The other sacred cow I was assured did not exist but certainly does is that women don't rise to the top in buyout firms. I hope to starve [this sacred cow] to death by denying that particular concept any factual sustenance.

QUOTABLE
“Be proud.” Jeremy Coller, during a speech delivered at EVCA's annual symposium in Monte Carlo in June, tells his peers how to feel about being in private equity.

“We have the hearts, minds and genitals of management in our hands.”

Richard Sharp, the outgoing head of principal investment at Goldman Sachs, on the merits of private equity's way of working with portfolio company managers. Quoted in Financial News.

“Every bank is trying to chip in on these deals to tap the high returns and growth potential of the buyout industry.”

According to Alan Hirakawa, managing director for Asian leveraged finance at Citigroup in Hong Kong, getting leverage into Asian buyouts really isn't a problem at the moment. Quoted by Bloomberg.