WSJ: My Experience as a Private-Equity CEO
My Experience as a Private-Equity CEO
By Armand F. Lauzon Jr.
In the past 10 years, I’ve been the CEO of three companies owned by the Carlyle Group, a major private-equity firm. I’ve watched with interest, therefore, as the private-equity industry in which Mitt Romney thrived has been portrayed as dedicated to corporate raiding, to profiting as it destroys. In the companies I’ve run and the private-equity industry I’ve observed, nothing could be further from the truth.
Private-equity firms exist for one reason: To create value for shareholders, the largest percentage of which are public pension funds. Firms do this by finding and investing in underperforming businesses that have potential for growth.
Many of these businesses have something unique and valuable about them but have been victims of poor management, lack of investment, or an inability to adapt to new market conditions. If a business under private-equity management doesn’t grow, there’s little chance of returns for investors and jobs can be put at risk.
The power of the private-equity model is that, unlike in the traditional corporate model, the interests of investors, management and employees are aligned. Managers like me are required to put our own capital into the company. Some call this “skin in the game”—I call it being an owner. And we all know that ownership is a powerful motivator to care and succeed.
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