[madballster]

Ballou's criticism of PE fund managers being skilled in finance but not in operations or engineering is missing the point. A good PE fund manager understands the ins and outs of capital allocation and its long-term effects on corporate performance. A typical engineer or product company founder does not, and those who do are the exception. PE companies are never operators of businesses. They find (ideally) competent management teams and advise them in capital allocation. Ballou alleges PE buys to pillage and throw away the corpse. In truth, PE buys to sell, that's the only way to make good returns.

In a perfect world, they'd buy an under-managed, undervalued company, where necessary throw out management, bring in competent management, perform bolt-on M&A where it makes sense, improve KPIs, then sell a rejuvenated and much more competitive company 5-10 years later at a much higher multiple. Examples? Ingersoll-Rand, Brenntag, SS&C. Unfortunately, Ballou does not talk about the positive outcomes because they don't make headlines.