As I expected, my Fool colleague Matt Koppenheffer raises excellent points in his defense of private equity. These battles are never easy, nor do they come with clear-cut answers.
I agree that private equity is helpful in streamlining lumbering companies. Take a look at Wilbur Ross. Using private equity capital, he was able to rejuvenate the U.S. steel industry and headed the merger that created Arcelor Mittal
The concern is that private equity players will get too aggressive and focus on "quick flips." An example is the buyout of Hertz
So how much restructuring is possible in such a limited amount of time? It seems like there was mostly financial engineering, not a broad vision to improve the competitiveness of Hertz.
With billions flooding into private equity firms, there will be lots of pressure to get competitive returns. Keep in mind that private equity firms raised $215 billion last year, and it looks like the amount could be $400 billion this year. The influx of capital could lead to paying too much for deals. Just this week, Goldman Sachs
Perhaps the telltale sign for investors is that mega-private equity firms are thinking of cashing out. Back in February, Fortress Investment Group
Fool contributor Tom Taulli, author of The Complete M&A Handbook, does not own shares mentioned in this article. He is ranked 1,898 out of 28,990 rated investors in Motley Fool CAPS. The Fool has a disclosure policy.