Many private equity firms improve the operational efficiency of the companies they own. They make tough decisions and risk capital, so they need some reward to make it worth their while. Private equity firms have managed to turn around many companies, such as Dollar General, Dunkin’ Donuts and Hilton Hotels.
New York-based Apollo Global Management is one firm known for buying struggling companies. Many large investors trust Apollo with half of its investments coming from public pensions and sovereign wealth funds. Morgan Stanley Venture Partners is another private equity firm that invests in high-growth companies in the healthcare and technology industry.
Negative impacts of the bill’s proposals
The billwould impose a 100% tax on fees paid to private equity firms from companies. It also proposes holding private-equity firms liable for legal judgments, pension obligations and debts of the companies in which they invest. This will result in a lack of incentive for private equity firms to invest in distressed companies. Why take risks if there is no reward?
