Initially, Mitt Romney’s candidacy for president definitely brought with it some confusion about the nature of private equity. Shortly after, a lot of people spent large amounts of money on ads to tell the public what private equity is – that we’re job creators, that we buy companies and build them, and that we enhance management, which enhances the competitiveness of American companies.
Mitt Romney definitely shone a light on an industry that needed a lot of clarification, something I think was accomplished. Recently, we have been travelling around the state of Connecticut with our PAC, Keeping America Competitive, to talk to real business owners. We talk about private equity, small company growth, lending in general, and I don’t think the view on private equity is negative at all. I think the basic beneficial element of Romney’s candidacy is that the general public understands private equity better today than they did before he ran for president.
Romney’s candidacy encouraged groups like the Association for Corporate Growth and others to step forward to clarify and explain the emerging statistics around private equity, the middle market and lower-middle market. I don’t think that would have happened if Mitt Romney wasn’t running for president.
The Democrats can’t easily point to this big demon called private equity because they can’t define it. And I think the Republicans have done a good job. Also, it should be noted that, while many people think private equity is all Republicans, there are plenty of Democrats at private equity firms. I would argue that it’s not more than 60/40 one way or the other. So by demonising an industry, you’re demonising your own party too.
I think Mitt Romney has a 50/50 chance of winning the presidency. Unfortunately, when there’s uncertainty that puts M&A activity in a bit of a holding pattern. If Barack Obama wins and the Democrats control the Senate, I think there’s going to be fear of higher taxes, which should spur M&A activity before the tax hikes occur. I think that if Romney wins you’ll see a temporary bump in the economy in terms of public sentiment. You won’t see that if Obama wins, but you will see a lot of things happen very quickly in terms of businesses being sold this year before capital gains taxes increase next year.
Ultimately, Romney’s candidacy contributed more positives than negatives in its overall impact on the industry. While the initial attacks may have been misleading, Romney’s candidacy built a stage from which private equity could combat the negative perceptions that have occasionally dogged it over the years. The efforts of organisations like the Association for Corporate Growth have clarified how people understand what we do, and the level of understanding those who had been unfamiliar with the industry now display is refreshing. More importantly, it bodes well for our future.
For complete coverage of the US presidential election's effects on the industry, see the November issue of Private Equity International.