Life inside a private equity firm

Amy Scott Jan 2, 2009

Life inside a private equity firm

Amy Scott Jan 2, 2009


Kai Ryssdal: Last summer, federal regulators took over IndyMac. It was the first big bank failure of the financial crisis. Today the FDIC said a private equity group’s arranged to take IndyMac off its hands for almost $14 billion.

Getting the deal done was no mean feat. The credit crunch has taken a big bite out of private equity. It’s not so easy anymore for buy-out firms to pay for their deals with loads of debt.

Private equity is still one of the glamour jobs in finance. Highly compensated, and highly secretive. Marketplace’s Amy Scott’s been talking to a woman who claims to be on the inside.

Amy Scott: Everything I know about private equity I learned from reading a blog. Well, at least all the really juicy stuff. Like, you can negotiate better borrowing terms if you have a hot chick on your staff. The blog is called “Going Private.” It tells the story of an anonymous young woman who lands a coveted job at a buyout firm straight out of business school. Here’s a dramatic reading:

Blog Excerpt: “Private equity.” It is hard to explain to the unwashed the draw those simple words pull on a young and somewhat naive finance mind with “private” smacks of smoky back room deals and silent professionals all “in the know” before the rest of the street. “Equity”? Well, it just sounds better than “debt” doesn’t it?

The blogger calls herself Equity Private, or E.P. It took weeks to convince her to talk to me. She’s so secretive she refused to meet in person. When I finally got her on the phone she explained why she’s so coy.

Equity Private: I actually have a couple of friends that have been fired for writing about their work experience. And I’m kind of attached to my blog and attached to my job, so I’d like to continue both.

For the past few years, E.P. has written about her adventures at a firm she calls Sub Rosa. That’s Latin for “beneath the rose.” A reference to secrecy.

E.P.: I looked around and there was literally nothing to read about what went on day to day. So I thought there maybe should be.

Her posts range from technical analysis of deals gone bad, complete with charts, to veiled gossip about the market. Long passages compare activist hedge funds to Polonius in Hamlet. Loud, full of unwanted advice, in the wrong place at the wrong time. Popular stories feature a character known as the Debt Bitch. She’s the attractive brunette who can finagle a lower interest rate with a bat of her eyelashes.

E.P.: I think it has in some ways become Desperate Private Equity Housewives.

That mix of analysis and drama is what first attracted Kemper Olmeyer to the blog.

Kemper Olmeyer: The combination of the soap opera “Days of Our Lives” meets private equity meets Grant’s Interest Rate Observer.

That’s a newsletter for Wall Street insiders. Olmeyer says he was so taken by the blog he emailed E.P. for months to arrange a meeting. He understands why she guards her identity. He’s one of the friends she mentioned who lost his job at a major Wall Street firm for blogging.

Olmeyer: Even though I never once mentioned anything about the firm, any inside information, any client information; it was purely public information that I was commenting on, they still felt that it presented too much of a risk — a reputational risk — to the firm.

But EP’s anonymity also makes her story a bit hard to believe. Shaen von Bernhardi says when he started reading the blog, he had his doubts. Von Bernhardi works at a small private equity firm. He says he recognized the ring of authenticity. But he thought no real insider would be that reckless. He says he realized E.P. was the real thing when he figured out he’d actually gone to school with her.

Von Bernhardi: Off-handedly I happened to be talking about this fantastic blog, and watching her turn redder and redder in the process, until finally I think she broke down and told me.

When I called Von Bernardhi to talk about the blog, he was in the midst of a deal meeting. People are still doing deals, believe it or not. He says he likes E.P.’s slightly jaundiced view of private equity. She writes of the brutality of the business — the jobs lost in a buyout, the deception.

Bernhardi: Even in the midst of its practice, she regards it with a rather skeptical eye. And I think that’s incredibly valuable for anybody who might otherwise be lured or tempted into the business by its more glamorous representation.

E.P.’s had a taste of how tough the business can be. Since the market for leveraged buyouts dried up, she says her firm gave her a sabbatical. She’s been writing for a website called Dealbreaker — a self-described Wall Street tabloid. Elizabeth Spiers founded Dealbreaker. She says in a way it doesn’t really matter if E.P. is who she says she is.

Elizabeth Spiers: If it were all made up, I mean, she would have done an impressive amount of research and, you know, taught herself essentially how to do the job of the person that she’s claiming to be. Which would be on the one hand a little bit appalling, but on the other hand impressive in a twisted way.

Just like the market, “Going Private” is on a bit of a hiatus. But E.P. says the blog will be back. And when lending loosens up a bit, she says, so will private equity.

In New York, I’m Amy Scott for Marketplace.

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