The private equity industry has suffered a tough week on the public relations front.
First, there was a protest in New York that, while tiny, didn’t help the industry’s image any. Its theme: private equity’s tax treatment in general and that of Carlyle Group’s CEO David Rubenstein in particular. While private equity firms didn’t design the tax code, it hardly plays well in print that Rubenstein’s tax rate on a significant part of the firm’s profits is 15 percent, while many cops and teachers out there pay 35 percent.
Then there was the fallout from private equity buyers’ decision to back out of their deal to buy Harman Industries International, which has sent the company’s shares down around 30 percent since Friday morning. The withdrawal was an added blow on the PR front in that the deal was supposed to allow Harman shareholders to keep an equity stake in the company. How do fund managers feel about the buyers — KKR and Goldman Sachs — now?
Then, finally, there was the front page New York Times article on Sunday titled “At Many Homes, More Profit and Less Nursing.” It focused on Warburg Pincus portfolio company Centennial Health Care, and its Habana Health Care nursing home.
The story doesn’t exactly paint the private equity owners in a positive light. Warburg Pincus declined to comment for the story. It’s bad enough when private equity owned widget makers cut jobs. But when cuts allegedly hit the operations of a nursing home, it’s truly a an image fiasco. The article focuses on a family whose mother died from a feces-infected bedsore at the home. The Times offers its own analysis on cost cutting at nursing home facilities across the U.S. in its several thousand word story, equipped with charts and graphs.
The buyout industry formed a trade group this year to help promote its image. After last week, they’re going to need to earn their keep .

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Ouch. The timing for this story couldn’t be worse for the Carlyle Group, which is busy finalizing the largest-ever buyout of a nursing home chain, its $6.3 billion buyout of HCR Manor Care. It would be nice if Carlyle used the buyout to prove everyone wrong and improve care, given that more than 85% (!) of Manor Care facilities already report CNA staffing levels below 2.8 hours per resident day—a standard identified in a Centers for Medicare and Medicaid Services study as necessary to properly care for residents. Unfortunately, so far it looks like more of the same – “more profits, less nursing” – the takeover will result in a windfall of as much as $254 million for top Manor Care execs, including as much as $186 million for CEO Paul Ormond, plus Carlyle will get millions in fees. Read more here.
- Posted by Behind the Buyouts[…] is another blow to the image of private equity, which is trying to improve the public’s perception of the industry. The Time’s article […]
- Posted by LBO firms take heat in nursing home probe - Reuters DealZone