Romney's Fame Brings Attention To How Private Equity Firms Make Money

This article provides some insight into how private equity firms operate. Mitt Romney's private equity firm provided an 88% return to its investors. They did not get above market rate returns like that by growing companies and creating jobs. They get a lot of help from government tax policy. They also found a way to get the money that they invested back quickly. The acquired firm borrows money and it is used to pay dividends to the investors. Loading the acquired firms up with debt, in order to get their invested funds back quickly, also made it more difficult for the acquired firms to survive market downturns. That didn't bother Romney's firm. They received millions in management fees even when the firms eventually went under. Of course, some of the firm's survived and they could be taken public or sold to other investors for another payout.