Insider Review: New Anti-PE Book Uses “Cherry-Picked Data”, Delivers “Incoherent Narrative”

Columbia Business School Professor Jonathan Knee highlights “laughable data” and
“demonstrably false statements”

A new book, These Are the Plunderers: How Private Equity Runs — and Wrecks — America, seeks to demonize private equity with supposed “decades of data.” Instead, it’s a wandering tale that lacks any real evidence. Per his recent review in Insider, Professor Jonathan Knee states: 

  • “The biggest problem with the authors’ full-throated attack on the sector is that the overarching narrative into which they try to stuff the facts is, well, incoherent … [T]he authors’ cherry-picking of research papers, combined with their use of demonstrably false statements without any attribution, renders their purported reliance on data laughable.”

Knee refutes the book’s assertion that “[private equity] pirates typically put down a single-digit percentage of the purchase price when they buy a company”:

  • “This view of a ‘typical’ private equity deal is simply untrue: Even back in 2005, the average loan-to-value percentage for new private equity deals was 68% — firms already contributed over 30% in equity to the deals not under 10% as claimed. By 2020, the equity component approached 50%.”

Further, as evidence of the book’s “recurring pattern” of cherry-picking research papers, Knee notes:

  • “[T]he writers repeatedly make the claim that 20% of PE-backed deals go bankrupt within 10 years, based on a single paper in a field journal that examined a small sample of old deals as small as $50 million. Following a recurring pattern in ‘Plunderers’, contradictory research published by the leading economists in top journals is not referenced.”

Knee also calls out the false connections the book attempts to make of bad business stories to private equity, saying: 

  • “But even here, the case studies often do not prove that the problem is private equity: Purdue Pharma was family-owned, not a PE-owned business after all.

The truth is private equity continues to build better businesses in communities across the country, investing primarily in small businesses (85% of all private equity investments in 2022) and directly employing over 12 million workers in the United States.

 You can read Knee’s full review here.