The Private Equity Investor Has No Clothes
I trust you know the story, The Emperor’s New Clothes.
In short, swindlers promised the Emperor the finest suit from the finest cloth. The cloth was so exquisite it was apparently invisible to those unfit for office or unpardonably stupid. Not wanting to be categorised as such, the Emperor agreed the suit was exquisite and accepted it. As the Emperor paraded his new suit, the townsfolk commended him on his fine choice of loom.
Of course, there was no suit (it was invisible because it didn’t exist) and it took a small child to express this observation before everyone else caught on. The Emperor ended up short a few pesos for the privilege of running around town naked and the townsfolk were shown to be so impressionable that they couldn’t distinguish a clothed Emperor from a naked one.
There are plenty of messages in this fairy tale that transcend private equity (and most other industries). For me, it emphasises the importance of a private equity investor to have a voice, think independently and be unabashed in expressing an opinion.
At the moment, if deals are looking a little naked (high multiples, poor fundamentals, under-performing industries, high risk, high valuation, etc), differentiate yourself by opposing the townsfolk (other general partners) and calling out said nakedness. Make it known you’re an independent thinker (and private equity investor) whom has learnt from recent events and is sensitive to current conditions. It’s the perfect time to be genuine in exposing your independent thinking; not so much for self-promotion, but for self-preservation and the preservation of your fund.
