Deal is a 4-Letter Word
PE Firm Bans Employee Use of the Word "Deal"
The Private Equity firm Partners Group Holdings manages over $100bn in assets from its headquarters in the Swiss Alps. And it has just banned employees’ use of the word “deal”, imposing monetary fines on those who do so (including so far one partner of the firm).
According to the firm’s founder, David Layton, “We want to act like founders, not financiers.” He says the word “deal” reduces the ownership of a company—which has executives, employees, a strategy and a mission—to a one-time event. He wants the employees of his firm to act like they are owners of businesses, not merely the doers of deals.
You can read more about the Partner’s Group initiative here.
This strikes me as an encouraging sign. I hope that it works its intended effect on the Partners Group firm culture and that this example resonates across the PE industry. Finance students too often think of a business as just a bunch of numbers on a spreadsheet, and this mentality often continues with them in their professional careers. When I was a young investment banker at Salomon Brothers, a firm with its roots in bond trading, the CEO of the firm used to refer to M&A transactions as “trades”. We had to teach him that these complex transactions were not “trades'“, they were “deals”. This was our attempt to demonstrate long-term strategic thinking. But of course as investment bankers were not acting as owners of the firms being bought and sold, and so to us these transactions were in fact deals.
Warren Buffet has published the Berkshire Hathaway corporate governance principles under the title “Owners’ Manual”. And this is how PE firms should and mostly do think about the companies they control—as owners of the businesses—even if they bought their shares in a “deal”, or even a “trade”.