October 22, 2021

No Deal: PE Firm Changes Its Vocabulary

By now, I’ll wager that most of you have seen the article that appeared on the front page of yesterday’s WSJ, which discussed a Swiss private equity firm that’s banned the use of the word “deal.”  In most of the PE world, I think that would generally be regarded as a more outrageous move than banning fleece vests, but as the firm’s CEO explains, they have their reasons:

Two decades ago, Mr. Layton says, the buyout business was a $700 billion industry in which firms made big money with a simple formula: buy companies using a large amount of debt, make some cosmetic changes and sell them off. These days, it’s an $8 trillion industry, and if firms want to make the double-digit returns their investors expect, they have to think like entrepreneurs, he says. “We want to act like founders, not financiers,” Mr. Layton says. “Do our customers love us? Is our product resonating?”

He says the word “deal” reduces the ownership of a company—which has executives, employees, a strategy and a mission—to a one-time event. He wants the employees of his firm to act like they are owners of businesses, not merely the doers of deals.

Preferred vocabulary includes “stewardship, governance, strategy, culture, entrepreneurship, operational excellence and sustainability,” he says. Some employees have resorted to using the word “investment” as a substitute for the banned word.

Now, this is a hard thing for somebody who’s the editor of and the Deal Lawyers newsletter to admit, but “deal” can get annoying, and frequently sounds a little too “bro-ey” – if you “deal guys” who “do deals” know what I mean.  That being said, that last paragraph about the new preferred vocabulary strikes me as just bonkers. Do they really think the right answer to refocusing their team is to swap a bro-ism for a bowlful of ESG-babble?  I can just imagine their new “mission statement”:

The cornerstone of our investment (BUZZ!) strategy (BUZZ!) is to provide responsible stewardship (BUZZ!) by leveraging governance (BUZZ!) best practices to assist our portfolio companies in developing and implementing growth strategies (BUZZ!) that ensure operational excellence (BUZZ!) and sustainability (BUZZ!) while maintaining their entrepreneurial (BUZZ!) corporate cultures. (BUZZ!)

Rearrange these buzzwords any way you like – they aren’t going to sound any more credible than what I came up with.  There’s no way that anyone who’s spent more than 10 minutes dealing with private equity is going to swallow something that sounds like it came from Greenpeace. Speaking of which, did you see the part about the penguins? Take it away, WSJ:

“People in our business are called sharks, vultures, wolves…in Germany they call us locusts,” Mr. Layton says. “At Partners, we’re like penguins. When it gets cold they all huddle together to protect the young penguins.”

Yeah, sure. According to the article, this firm has done $27 billion in  deals baby penguin protections in the last year, so this isn’t part of a campaign for a Nobel Peace Prize. They’re just looking for an edge in the highly competitive market for doing deals. protecting penguins.

John Jenkins