Not one to mince words, KPS Capital's Michael Psaros offers a ...

10-19_Watercooler.qxd 4/6/09 5:37 PM Page 18Water Coolerwhat players in the midmarket are talking aboutPoliteConversationThe doomsayers came out, offering different takes on the future of private equity“The men and women who sit on the credit committees of thebank and non-bank lending institutions are staring into theabyss, and it is going to be a long time before they’re financingcash flow at four, five or six times. The ‘L’ in LBO is dead.But now we get to see how good people are at generatingreturns through fixing and growing businesses.”— Michael Psaros, co-founder and managing partner of KPS CapitalPartners, discussing the prospects for private equity. The full Q&A can befound on page 36.Michael Psaros“When I was 11, my father, a businessmanwho, in his day, took a dubious risk or two,gave me a key lesson in finance and life whichI knew was meaningful without understandingit. ‘You’re not bankrupt,’ he said, ‘untilpeople know you’re bankrupt.’By which he meant, I’ve come to understand,that money is a complicated reality. It’s a masterillusionist’s game. The artifice is everything.Transparency is the enemy of making it reallybig-which is one reason the word ‘private’ gotjoined ‘to equity.’” — Michael Woolf, in an article“The Ultimate Bubble?” found in the February issue of VanityFair.“The biggest impact of the perfect storm will beon the private equity firms themselves. Weestimate that around 20 to 40 percent of thesefirms will disappear; on the other hand, at least30 percent will survive. The fate of theremaining firms will hang in the balance.The timing of the next fundraising round andthe private equity firms’ historical performancewill drive this shakeout...We found that theshakeout will affect individual firms in very differentways.” — A report, “Get Ready for the Private EquityShakeout,” released in December 2008, by The Boston ConsultingGroup and IESE Business School18 MERGERS & ACQUISITIONS February 2009