Annals of private equity, Tamara Mellon edition

February 13, 2012
said that "at the end of the day, the person who has the money has the control" is now changing her tune somewhat.

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When Tony Hsieh sold Zappos to Amazon, there were lots of glowing stories about his monster success. Only later did it emerge that he never wanted to sell at all, but felt forced to do so by his VC backers.

It now seems that a similar narrative is likely to emerge from Jimmy Choo president Tamara Mellon. The woman who famously said that “at the end of the day, the person who has the money has the control” is now changing her tune somewhat:

In the New Year – I will give interviews and talk about the MONSTER Private Equity has become and the VULTURES that operate in it.
Dec 15 11 via Twitter for BlackBerry® Favorite Retweet Reply

Remember – Its entrepreneurs that create jobs, not Private Equity or Investment bankers.
Jan 17 via Twitter for BlackBerry® Favorite Retweet Reply

It’s always love and kisses when a private-equity company takes control of your firm: they promise investment, and growth, and riches beyond your wildest dreams. All of which came true for Mellon (who acquired her surname by marrying a man with 14 trust funds, but that’s another story). But then the clock strikes midnight, and your eager backers are forced — they have LPs to answer to, after all — to sell your company out from under you.

Mellon’s blaming the GPs here, and I don’t blame her — they’re the people who make all the promises and the decisions. But she’s a financial sophisticate who knows full well how private equity works: it always needs an exit. And when it exits, it will always sell to the highest bidder, rather than to some potential buyer who might be more likely to preserve value over the long term.

It’s going to be fascinating to hear what Mellon has to say about the way that private-equity professionals behave. Most of the time, the beef with such firms is that they do well by themselves and by senior management, but can fatally damage the company while doing so, and don’t care at all about rank-and-file employees. Mellon is rare in that she’s a member of senior management and she’s upset.

But once you have Mellon’s money, a few extra millions tend not to have the mollifying effect that they might have on a less affluent founder. Mellon made a fortune when she (or her backers) sold Jimmy Choo — but she had a fortune already, at that point. What she really valued, it seems, was her company, and her career. And it’s easy to see how her backers might have stripped her of both those things, in their big and profitable exit.


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