WSJ’s Berman: PE needs ‘humility’ to help image

Dennis Berman, an editor and columnist for the Wall Street Journal, on Thursday spoke with KKR’s Peter McKillop at a PEI conference about ways the industry can improve its image.

Dennis Berman, an editor and columnist for the Wall Street Journal, today spoke with KKR’s Peter McKillop at a PEI conference about ways the industry can improve its image.

The private equity industry needs to demonstrate some humility to help improve its image, at least in the eyes of the media, according to Dennis Berman, deputy bureau chief for money and investing at the Wall Street Journal.

“In some ways it’s the arrogance, you’re selling arrogance, and I get that …there has to be less arrogance and more of, ‘here are the basic things we do … and let me be honest with you about what we thought we could do [with this investment],” Berman said at the PEI Investor Relations & Communication Forum in New York Thursday.

Berman made his comments as part of a broad-ranging onstage discussion with Peter McKillop, director of global communications for Kohlberg Kravis Roberts. Part of the discussion focused on what the private equity industry has done wrong in the past in terms getting its story out to the public.

“[There has been] a culture of privacy and secrecy inside the private equity industry that does not create openness and the benefit of the doubt you might think you would get,” Berman said.

In addition, the industry has not been totally forthcoming about mistakes made during the credit bubble, Berman said. “There’s not the acknowledgement of bad assumptions, mistakes . . . This is the point where private equity can change how it’s perceived,” Berman said.

Private equity still needs to convince the media, and by extension the wider public, that it can actually deliver what it touts about improving company operations and creating jobs.

“There’s such an exceptionalism about people in private equity. ‘We can fix it better than anyone else’. I’m skeptical of the broader ability of private equity to do what it says,” Berman said.

McKillop countered with an example of KKR’s recent exit of East Resources as a private equity deal where capital and expertise allowed the investee company to grow in value. Royal Dutch Shell earlier this month agreed to pay $4.7 billion for the company, a US natural gas exploration firm that holds more than 650,000 acres of a major US shale formation. KKR invested $350 million in the company last year for a “substantial minority stake”, implying a hefty exit for the firm.

Berman responded to a question about how to get a positive story published by saying it was important first to establish relationships with relevant reporters.

“You can’t just say, I’ve got a story for you,” Berman said. “I’m amazed at how lame some people are – they’ll send an email, and then send another email and say, ‘Did you get my email’?” Berman said. “The worst thing you can do is spend time on Facebook and send a bunch of emails. There’s nothing like face to face.”

One easy way firms can be more open and accessible to the media would be to take reporters through “case studies” of deals – including what factors originally attracted the firm to the deal and what it hoped to accomplish, Berman said.