The New Tycoons Inside the Trillion Dollar Private Equity Industry
That Owns Everything
NEW HARDBACK BOOK

What do Dunkin' Donuts, J. Crew, Toys "R" Us, and Burger King have in common? They are all currently or just recently were owned, operated, and controlled by private equity firms. The New Tycoons: Inside the Trillion Dollar Private Equity Industry That Owns Everything takes the reader behind the scenes of these firms: their famous billionaire founders, the overlapping stories of their creation and evolution, and the outsized ambitions that led a group of clever bankers from small shops operating in a corner of Wall Street into powerhouse titans of capital. This is the story of the money and the men who handle it.

Go inside the private worlds of founders Henry Kravis, Steve Schwarzman, David Bonderman, and more in The New Tycoons, and discover how these men have transformed the industry and built the some of the most powerful and most secretive houses of money in the world.

• With numerous private equity firms going public for the first time, learn how these firms operate, where their money comes from and where it goes, and how every day millions of customers, employees, and retirees play a role in that complex tangle of money


• Author Jason Kelly tells the story of how thirty some years ago a group of colleagues with $120,000 of their own savings founded what would become one of the largest private equity shops in the world, completing the biggest buyout the world has ever seen, and making them all billionaires in the process


• Presents a never-before-seen look inside a secretive and powerful world on the verge of complete transformation as the industry and its leaders gain public profiles, scrutiny, and political positions

Analyzing the founders and the firms at a crucial moment, when they've elevated themselves beyond their already lofty ambitions into the world of public opinion and valuation, New Tycoons looks at one of the most important, yet least examined, trillion-dollar corners of the global economy and what it portends for these new tycoons.

REVIEW:
 

Private equity is ill-understood by the general public because it is private. They don't have to file statements with the SEC, all they have to do is inform their limited partners on how they are doing.

Jason Kelly gives us a neutral view of what is going on in private equity. I think he is neutral, because he does not come across as a fan or a critic. Personally, I think that is hard to do with private equity, because 1) it is easy for some to become amazed at the success of some incredibly wealthy and clever businessmen, or 2) it is easy to take offense at these shadowy capitalists that have produced bankruptcies, fired many people, and have been very clever at using the tax code to pay minimal taxes.

Both of these views are caricatures and the truth does not lie in-between but embraces both views. Indeed, in many cases, jobs have been preserved or created through private ownership of firms. Many firms might have died without private equity restructuring the company, leading to the loss of all jobs.

Jason Kelly takes you through all aspects of private equity:

Fundraising
Leverage
Dealmaking
Operations
Exiting (Selling)

He also introduces you to all of the major private equity shops, and their leadership.

One thing the author highlights in the book is the pervasiveness of private equity. He notes how many businesses are managed by private equity. In general, these are businesses with steady cash flows that can service the debt that the private equity funds borrowed to buy them.

Some private equity firms are passive, and don't try to improve operations. Others make a great effort to grow the companies, hiring new people in the process, and taking risks to create a better company. It depends on the philosophy of the private equity owners.

The book does note the favored tax status of carried interest, but takes the position that the private equity investors are following the law, and that they will follow the law should it be changed. (My simple idea is that interest should not be taxed, or be a tax deduction.)

The book does note trends:

Private equity is becoming more public, as more large private equity firms go public.

Complexity inside private equity firms is growing as they broaden the scope of services that they provide. The owner/founders are moving on, and a new generation of management is taking the reins.
Returns may be falling as private equity gets larger.

In all, a good book, but one that may leave partisans unsatisfied. It does not demonize or engage in hagiography
-David Merkel