Private Equity Briefcase

February 19, 2008

Putting PE To Good Use

The large private equity deals have gone away, leaving buyout executives with figuring out what to do besides attending benefits, managing portfolio companies, or procuring particular vintages of Whyte & Mackay Scotch whiskies. So, what do buyout executives with time on their hands do?

Well, one veteran LBO chieftain is aiming to work on the world’s problems.

That’s what Blackstone Group honcho Peter Peterson has in mind with the formation of the Peter G. Peterson Foundation. The senior chairman of the New York private equity firm, also a former Federal Reserve Bank of New York chairman, has set up the organization to address economic issues, healthcare costs, energy consumption, education and underground biological and nuclear weapon materials distribution.

"We've reached the make or break point in American history. These problems have reached tidal proportions and festered for more than two decades,” says Peterson in part of a statement about the new foundation.

No kidding.

At first blush it would be easy and rather cynical to dismiss the foundation’s formation, an effort announced on Feb. 15, as a ploy to distract the hoi polloi from Blackstone’s investment activities or co-founder Stephen Schwarzman who, it appears, can’t seem to get past endless media citations about one particularly lavish birthday party. It would also be simple to argue that the foundation’s plans are simply far too wide ranging and ambitious when it comes to societal challenges that are, again, of “tidal proportions” as well as ”imperil the American way of life for future generations.”

Perhaps it is the American way of life that has helped contribute to the world’s ills, but that’s a conversation for another day.

Peterson, though, deserves to be lauded for taking his philanthropic effort one step further by committing at least $1 billion of his own capital to finance the foundation’s problem-solving initiatives. Big problems, after all, cost a lot to fix and who better to fund them than a smart, well-heeled LBO dealmaker.

As saving-the-world endeavors go, this one isn’t exactly an un-worthwhile one. Peterson has tapped US Government Accountability Office executive David Walker, who has served as comptroller general for nine years, to head up the foundation as its president and chief executive. There’s no question the 56-year- old Walker knows his way around Washington and economic issues. But, does Walker bring the ideal background for handling nuclear threats?

If you ask me that issue, in particular, is one the government and its various intelligence agencies are much better suited to handle.

Peterson’s foundation deserves to be credited though for its overall purpose and for seeking the input of “young Americans and their parents” in developing programs to handle various challenges facing the world’s inhabitants. 

Now, if only they can tear young Americans away from their Wii’s, PlayStations, iPods and heavy homework loads long enough, while helping work-burdened and economically-strained parents find the time to solve the world’s problems, then they’ll be half way there. That’s where Peterson and his crew might want to start.