Private Equity and The Public Good

Authors

Daniel J. Morrissey, Gonzaga University Law School

First Page

881

Document Type

Article

Abstract

Private Equity (PE) is a term for large funds that use mostly borrowed money to buy and restructure companies, supposedly to make them more profitable. They manage trillions of dollars in holdings and have come to dominate many sectors of our economy, often not for the better. Private Equity is perhaps a more genteel form of the hostile take-overs that were so prevalent several decades ago, because now instead of ousting management of the firms they acquire, Private Equity offers their officials sweet deals to stay on. Those arrangements often raise conflicts which result in the shareholders of the target companies receiving less than full value for their shares.

But an even more serious problem with Private Equity firms is that many times society and ordinary individuals pay the price for the adverse consequences that result from their purchases of viable companies. They load those businesses up with unsustainable debt and channel their assets to themselves by way of big dividends and consulting fees. That frequently results in the consumers of those firms getting poorer quality goods and services while the private equity insider become fabulously wealthy.

It is unlikely the current administration dominated by fund managers and other members of the super-wealthy will take any action to address these serious concerns. Yet as the situation continues it will be even more necessary in the future to find ways to control private equity firms and counter the on-going scandalous wealth and income inequality that they are inflicting on our country.

This Article will therefore examine these often harmful operations and review various proposals to tame them by reining in some of their socially irresponsible conduct. In addition, the author will put forth his own reforms that would require Private Equity firms to be both more transparent about their results and receive prior approval from public officials to make sure that their goals truly serve the common good.

Recommended Citation

Daniel J. Morrissey, Private Equity and The Public Good, 73 Buff. L. Rev. 881 (2025).
Available at: https://digitalcommons.law.buffalo.edu/buffalolawreview/vol73/iss4/3