Romney's Claims Contradicted by His Own Peers: Street Whispers
By Antoine Gara - 08/09/12 - 9:14 AM EDT
Story updated to reflect Bain Capital's investing history.
NEW YORK (TheStreet
) -- Mitt Romney says businesses and investors are turned off to President Barack Obama's high taxes, costly regulation and the government's expanding power over the private sector.
Romney's peers in the private equity world would disagree.
A total of $74 billion, or about 70% of global private equity investments, have targeted U.S. companies this year, much higher than in other years, according to Bloomberg
data on completed and announced deals. That's up from 53% in 2011 and 61% in 2007, the year before Obama was elected and a banner year for the industry.
The top five buyouts in 2012 have targeted U.S. companies, highlighted by Apollo Global Management's
$7.15 billion acquisition of El Paso's energy exploration unit. Only three of the top 10 deals involve companies outside of the U.S., the data show.
Newly opened private equity investment funds are also increasingly concentrated in the U.S., according to PitchBook
data. Funds based in the U.S. have grown to over 70% of the private equity industry, up from 60% in 2007.
Those facts rebut Romney's argument that private capital is fleeing U.S. shores. You would think that Romney, as the former CEO of Bain Capital
, would know. The private equity firm's buyout history shows that 77% of its investments are concentrated in the U.S., according to Bloomberg
data. Since 2009, Bain has diversified itself and pushed into foreign markets, highlighted by its acquisitions of Japanese restaurant chain Skylark
and Swedish security provider Securitas
"When the price of doing business in America rises, it does not come as a surprise that entrepreneurs and enterprises cut back, let employees go, and delay hiring," Romney says in his 'Plan for Jobs and Economic Growth.' "Obama's
distrust and antipathy for the private sector led to policies that burdened and constrained business at the very time we needed it to advance, to invest, and to hire. So much is at stake: Nothing less than the future of our great country," adds Romney.
On the other hand, European deals have withered because of a regional debt crisis as Asia has taken on greater significance.
Still, amid a worsening crisis in Europe and fears that once red-hot markets like China and Brazil will cool or even crash, private equity industry leaders have said the U.S. remains the most attractive region for investment.
In second-quarter earnings released Wednesday, Carlyle Group
co-founder William Conway noted that the investment environment in the U.S. continues to be strong and actually is advantageous compared with the rest of the world. It also should come as no surprise that the firm, the second-largest in the industry, is also opening new U.S.-targeted corporate buyout and real estate funds that could benefit from a strengthening economy.
continue to believe that the U.S. economy is likely to grow faster over the medium term than it did in the second quarter. ... As a whole, developing countries continue to grow more rapidly than developed countries, although growth is much slower than last year. This slower growth has not come as a surprise. We began to see significant weakening in China in September 2011," Conway said on Carlyle's earnings call.
Other private equity titans -- even those critical of President Obama's policies and tone toward the industry -- also are scouring the U.S. for deals. Blackstone Group
, the world's biggest private equity fund, has raised eyebrows by making a full-fledged push into U.S. residential real estate, adding to a previous multibillion dollar economic recovery bet on commercial real estate.
"We are now buying post-foreclosed homes, which generally need some capital improvements, and we are leasing them up. We expect this activity to drive greater housing affordability and think it will help the nation economic recovery," Blackstone President Steven Schwarzman said on the firm's second-quarter earnings call.
"The U.S. and Europe are still the most attractive places to deploy capital," Schwarzman said, referring to real estate. Blackstone recently closed a $16 billion buyout fund -- the largest since the crisis -- that's likely to mainly target U.S. companies. Carlyle and private equity industry pioneer KKR
are also nearing the close of multibillion-dollar U.S. buyout funds, the biggest since the financial crisis four years ago.
For more on private equity and the election, see why private equity has a social responsibility and why Carlyle Group co-founder David Rubenstein says Mitt Romney would need to raise taxes as President.
-- Written by Antoine Gara in New York
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