The private equity industry defended its burgeoning influence in the telecommunications sector on Capitol Hill yesterday, responding to charges that the recent spate of media buyouts and take-privates may harm the public interest.
“I can tell you without equivocation that private equity investment is entirely consistent with public interest considerations,” Richard Bressler, managing director of Thomas H. Lee Partners and former Ti me-Warner and Viacom executive, told the House Subcommittee on Telecommunications and the Internet. “We have contributed much to the competitive and convergent nature of these industries.”
The public hearing was held after Federal Communications Committee commissioner Michael Copps complained publicly over the opaque ownership structure of many private equity firms. Copps’ comments came after reluctantly voting to approve several take-private deals.
I can tell you without equivocation that private equity investment is entirely consistent with public interest considerations.
Bressler was joined by Josh Lerner in arguing that such transparency concerns were overblown, as all private equity firms must comply with standard FCC disclosure requirements.
Many Republican committee members also championed the hidden benefits private equity might bring to the industry, including media deconsolidation and long-term infrastructure investments.
As private equity firms are often quick to liquidate a company’s nonessential assets, they argued, this would lead to the selling of once centrally controlled media units to local bidders.
Bressler also asserted that because private equity managers were not beholden to the quarterly demands of shareholders, they were more willing than public companies to deploy resources towards long-term infrastructure.
Despite these assurances, some members of the committee remained. Many expressed alarm at whether the heavy debt burden private equity firms incur in leveraged buyouts could eventually bankrupt their acquisitions, especially in the current credit climate.
“The FCC has the authority and the obligations to ask tough questions about these issues,”said Jane Harman, a California Republican. “If some of the major private equity firms are staggering and have to shed some of their assets, then that may ricochet down the chain”
The debate comes amid several recent high-profile telecom deals. TH Lee’s and Bain Capital’s $22 billion (€14.17) leveraged buyout of telecom giant Clear Channel is pending final approval from the banks financing the deal. Other recent acquisitions within the sector include the Broadcasting Partners $12 billion buyout of Spanish-language network Univision and Goldman Sachs’ $27.5 billion acquisition of wireless provider Alltell.
Meanwhile, Azure Capital Partners and Bridgescale Partners, both mid-market firms headquartered in California, today announced a leveraged buyout of NeoNova Network Services, a leading Internet provider to U.S. rural telephone and cable services. Azure and Bridgescale have invested more than $11 million in equity into NeoNova.