By David Acharya
Many people, myself included, were dismayed about how private equity was portrayed during the 2012 Election/2008 Credit Crisis and the resulting legislation of registration, compliance and blocking capital access. It seemed my entire professional career of advising, financing and investing in middle market companies to help grow their operations, invest in real equipment, and hire new employees was being invalidated. As such, when ACG Global asked me to volunteer to visit Capitol Hill and speak to various senior members of both parties of Congressional Staff, I jumped at the chance.
The primary purpose of the visit was to discuss how the middle market benefits the economy and congressional districts, including allowing capital formation and increasing access to capital for middle-market companies, which are the engine of growth for the economy.
The first proposal excludes middle-market private equity from the definition of a “covered fund” and allows banks more alternatives for investment, which is currently prohibited under the Volcker Rules and will significantly help with capital access.
Among the discussion topics, various staff members, according to the National Center for the Middle Market at The Ohio State University Fisher College of Business, learned that the middle market accounts for one-third of private sector GDP. That is to say, if the U.S. middle market were a country, its GDP would rank it as the fifth-largest economy in the world.
There are nearly 200,000 mid-market companies in the U.S. and they employ more than 44 million workers. Middle market businesses outperformed during the financial crisis (2007-2010) by adding 2.2 million jobs in major industry sectors and congressional districts across the country. Additionally, two-thirds of PE funds come from pension funds and university endowments where they have realized a 10-year return in excess of 14 percent – superior to all other asset classes.
Two years ago, ACG conducted research using independent databases to better understand the relationship of private capital investment on corporate growth and job creation. The resulting data are publically available at www.growtheconomy.org.
ACG Global and its various chapter board members have been instrumental in informing the political community in Washington, DC, and expect to grow its presence dramatically to continue to fight for the middle market in 2015 and beyond.
David Acharya is a Board Member of ACG New York and Partner at AGI Partners LLC (www.agi-llc.com); a NYC based firm specializing in private equity and special opportunities investments.