Private Equity, Public Protest

Private equity pioneer and Carlyle Group co-founder David Rubenstein today received a raucous introduction from a small crowd of angry protestors, who disrupted the annual Wharton private equity and venture capital conference and delayed his keynote address for a half hour.

Protestors from the Service Employees International Union began shouting and chanting from the balconies at the Park Hyatt in Philadelphia the minute Rubenstein started speaking, and managed to unfurl banners despite the efforts of security to stop them.

Then a delegation charged the stage with a megaphone and accused Rubenstein and Carlyle -- which recently acquired the nursing home company Manor Care-- of disregarding patient care and plotting layoffs.

"We take care of your parents and you don't care!" a protester shouted from the balcony.

"We bought the company two weeks ago," Rubenstein responded. "My investors have owned it for two weeks!"

It was a strangely fitting prelude to Rubenstein's speech, which emphasized the need to give back to society and overcome the growing public backlash against private equity firms.

The industry is going to have to do more "to explain what we do to create value," he said

"Nobody ever asked me all around the world, how many jobs we created, how many factories we built, what kinds of changes we created," said Rubenstein. "If we want to function the way we want, we can't just ignore Congress, labor unions and the media. We have to do a better job explaining to people what we do to make economies more efficient."

Private equity has entered a "purgatory age, where we're going to have to atone for our sins a bit," he said.

Rubenstein also predicted that in the months ahead, credit woes will force much smaller deals, "since nobody is there to syndicate the debt."

"You'll see much smaller non-leveraged deal," he said. "And you will see private equity overseas activity where leverage is not as important in places like India and China."

He expects new lending to resume in in six to nine months.

"I think you will see private equity come back in what I call the platinum age that will be better than ever before," he said.

Firms will become public institutions and grow to be 1,000 people and more, creating space for a new generation of private equity firms to sprout up and offer more options, he said.

Adam Piore