Taking back control

THE NOTION of the “first 100 days” as critical for a new administration goes back at least as far as Franklin Roosevelt. He first used the term in a radio address in 1933, shortly after becoming America’s 32nd president. Private equity has its own version. The 100-day plan sets priorities for a bought-out business. The new owner looks for “quick wins”—standard remedies for the most glaring operating problems. Fixes may include updating computing systems, slimming the array of products or closing loss-making divisions. The plan also prescribes the easiest ways to raise cash to pay off hefty debts used to acquire the firm.

The promise of private asset management (buy-out funds, private debt, venture capital and so on) is that endurance will be rewarded. Investors in private equity must lock up their money for years; they cannot easily sell out. Big stakes in private assets trade quite rarely. But there is an upside. Private managers are able to eke out better returns than would be possible if their assets were traded each day. Investors in the public markets like predictable short-term profits and strategic certainty. They are too skittish to invest in a corporate turnaround. If the boss of a listed company unveiled a 100-day plan, it might spark a run on the shares.

That is the sales pitch—and plenty of investors buy it...

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