[Don Plumley]

Private Equity 101:

Acquire a business with reasonable free cash flow. Load it with debt to fund the acquisition. This requires management to run the business very, very efficiently. In many ways, this is a good thing. Freed of short term market pressures, they can take earnings hits that would not fly in the next 10Q. But they may also need to sell off parts of the business, either divisions or product lines, to pay down debt and improve the balance sheet.

In the boardroom, private equity owners are ruthless, and if financial performance is not being met, management teams are tossed. Their objective is to sell the business in single-digit years (shorter the better) for more than they paid for it.

For the average individual at a company owned by a private equity firm, life goes on. Sometimes large investments are made in improving the company. Most of the time spending goes on a very short leash to meet the debt cash flow requirements.

So long as your company is not broken up into a bunch of bits, life is probably fine for you. Your best defense is to be important enough to a core technology that you are given appropriate retention and change of control compensation/contracts.