Bill Ford's Letter to the Editor, Published in The Financial Times

From Mr. Bill Ford

Sir, Michael Gordon’s editorial “The private equity boom was a clumsy trick” (April 1) defines private equity too narrowly and therefore comes to an incomplete and erroneous conclusion about the private capital markets. The term “private equity” encompasses investment types ranging from venture capital focused on financing early stage businesses to leveraged buyouts that employ debt to buy more mature companies. Moreover, the growth equity segment of the private equity industry – a vital and fast-growing sector focused on supporting the expansion of established growth companies – typically employs little or no leverage.

Equity capital is the lifeblood of growth companies. The demand for growth equity financing remains strong, particularly in a tight credit environment or one in which access to the public markets is becoming more constrained due to economic conditions, regulations and/or size limitations.

Importantly, growth equity provides not only needed capital but also strategic and financial expertise. The most effective growth equity investors offer industry knowledge, a global network and operational expertise to support a company’s strategic objectives. Growth equity firms align their interests with those of management and generate their investment returns over a long-term investment horizon through continued growth and positive fundamental performance. This investment approach is markedly different from driving operational improvements in mature businesses and obtaining returns from financial leverage.

The private equity industry is far more varied and segmented than the editorial implies, and its demise is greatly exaggerated. Growth equity is a significant part of private equity and is more critical than ever to the development and long-term success of growth companies – the engines of innovation, job growth and global economic development.

Bill Ford
CEO, General Atlantic
Greenwich, CT, USA