Blackstone's upcoming IPO has received a lot of media attention last and this week. Part of the reason is executive compensation package, totaling a multi-billion dollar figure (More on the distribution of Blackstone IPO proceeds: http://online.wsj.com/article/SB118156915112631131.html).
This whooping sum is characteristic for the private equity sector, which is the place to be nowadays - lots and lots of money can be made " by amassing investments from pension funds, endowments and wealthy individuals -- then buying up companies, turning them around and reselling them" (The WSJ on the private equity firms, http://online.wsj.com/article/SB118156915112631131.html). The attitude of business schools supports the notion of the private equity sector's popularity. The best business schools in the country create classes and specializations focusing on private equity, try to attract people with industry experience, as well as guest speakers and professors from the sector (See: http://online.wsj.com/article/SB118160869757131959.html).
It is all an understandable process; however, others might want a piece of the same pie. The hedge funds and private equity firms which are publicly traded and are limited liability partnerships have enjoyed lower tax rates than entities formed as corporations. However, the government tries to get more from their profits: "Wall Street's new masters of the universe, hedge funds and private-equity partnerships, are suddenly finding the universe a less-hospitable place.The latest pressure arose this week when the Senate Finance Committee decided to introduce a bill to tax financial-services partnerships that are publicly traded, as giant Blackstone Group soon will be, at the same higher rate paid by corporations." (From: http://online.wsj.com/article/SB118195651141637425-search.html?KEYWORDS=private+equity+taxation&COLLECTION=wsjie/6month More on the issue at: http://online.wsj.com/article/SB118185483791435821-search.html?KEYWORDS=private+equity+taxing&COLLECTION=wsjie/6month). The Wall Street Journal also notes, that lawmakers in Britain have similar intentions as the American ones: "Private Equity's Tax Breaks GetHard Look on Both Sides of Pond " (Read the whole article at: http://online.wsj.com/article/SB118212440211838480-search.html?KEYWORDS=private+equity+taxing&COLLECTION=wsjie/6month). The attitude is clear - private equity firms enjoy a real boom of their sector, as well as the advantages given by being publicly traded, without what is felt as fair rate of taxation imposed on them. Regardless whether it is the case, or the buyout firms just do not have enough lobbying power (See: http://online.wsj.com/article/SB118212767498638611-search.html?KEYWORDS=private+equity+taxing&COLLECTION=wsjie/6month), it is clear that in the end it is just about a greater cut of the big and growing private equity pie.
