State slips in rankings on secrecy of PE deals

Connecticut slipped from fifth to 17th among the states for attracting private equity investment last year, but that may be because of incomplete data on the value of those deals, an industry advocacy group said.

The Private Equity Growth Capital Council reported last week results of its annual survey of deals across the U.S. and found Connecticut attracted about $3 billion in private equity in 2011, down from $6.2 billion the year before. Nationally, more than $144 billion of private equity was invested last year, the survey found.

"A lot of the deals in Connecticut didn't disclose their value," said Bronwyn Bailey, vice president of research at PEGC, adding that it's difficult to say what those deals were worth, so the state slipped in its rankings.

Texas climbed to the top spot over New York and California. It attracted more than $20 billion in PE funding last year, outpacing the $18.6 billion in New York and $15.7 billion logged in California.

Bailey said Connecticut is attractive to the industry.

"It is a good place to invest," she said. "Connecticut comes up in the top on a regular basis."

The role of private equity in the economy is under more scrutiny as the likely Republican candidate for president, Mitt Romney, made a fortune working for Bain Capital. Democratic President Barack Obama and backers have launched an attack on Romney's affiliation with the industry, questioning whether Bain saved troubled businesses or sucked the life out of them for a profit.

The PEGC and business advocates see this as a dubious argument and are fighting back, saying the majority of firms are trying to create better companies.

"This report makes it clear that private equity plays a major role in the economy, not only around the country, but in Connecticut," said PEGC President Steve Judge. "Over the next several months, we expect the general election to amplify the conversation about private equity, but one thing is clear, private equity drives economic activity and growth across Connecticut. These numbers are an unambiguous reminder that, at its core, private equity is about investing in and strengthening American companies in our local communities."

Joe McGee, vice president of policy at the Business Council of Fairfield County, said painting private equity with such a wide brush ignores its role in the economy as a key way to capitalize new companies or those that are reinventing themselves.

"Private equity is broader than just Bain Capital investing in a steel company," McGee, a former state commissioner of economic development, said, referring to an attack add against Romney.

Private equity is the backbone of a capitalistic system, he noted, and key to developing an innovative economy.

McGee said Connecticut has worked for the last 20 years to encourage private equity investment, noting that the state produces a large number of patents and innovations that private equity likes to invest in.

According to PEGC's research, the biggest deal in Connecticut last year was a $1 billion private equity investment in Greenwich-based Diamond S. Shipping in August to fund the acquisition of 30 medium-range tankers.

In the 20 most active congressional districts, health care-related investment led the way, capturing 29 percent of private equity dollars. Connecticut's 4th Congressional District ranked 13th in the nation for private equity investment in 2011 accounting for $2.6 billion of the state's total investment.

Steve Monroe, editor of health care mergers and acquisition data at publisher Irving Levin Associates Inc., said private equity investment in health care is not a new trend.

"Private equity has been going into health care for a while because they see potential for high returns," he said.

But in Connecticut, he's not sure there's any more PE activity in the health sector than anywhere else.

"You buy a company, recapitalize it. ... You're not going to pulverize the entity," he said. "You either build some value, sell it or take it public."

rvarnon@ctpost.com; http://twitter.com/financialmines