Until the credit crunch socked the economy, we had bought into the idea that the private equity industry was in a Golden Era. The king pins of the buyouts game--the likes of Henry Kravis and Steven Schwarzman--were riding high. They were adored by society, revered as capitalism giants. The PR, despite the secretive nature of their firms, had never been better.  

Then came the recession-and the drying up of financing and the many woes at all their portfolio companies. More than half the 220 companies that defaulted on their bonds this year were either owned at one time or are still controlled by private equity firms, according to analysts at Standard & Poor's. So we shouldn't be surprised by the negative media coverage starting to crop up. 

The latest example is a thorough article in the New York Times, which ran on the front page--above the fold no less--about Simmons Bedding Company, of Wisconsin, which has been sold six times in two decades. The seventh sale is coming up. The article notes Thomas H. Lee Partners has made $77 million since 2003, as part of a larger gravy machine. Various private equity owners "have made around $750 million in profits from Simmons over the years." Wall Street firms cashed in also via debt sales and other work. Simmons progressively was stuck with $1.3 billion in debt, compared with $164 million in 1991. To make matters worse: It was stuck with a perceived absentee executive. 

The company's execs say the company, which is about to enter a bankruptcy agreement, would have thrived if the recession hadn't hit home, and they are likely at least partially right. Many of the companies would have at least avoided default. Now that the recession is waning, is the economy riding to the aid of the private equity industry in the nick of time? It seems that way. In fact, some say the Blackstone Group's deal for InBev may signal a deal resurgence. 

Certainly the critics of the private equity industry had a moment to press their case, and to some extent they were successful. We may see some congressional activity to do more than tax the carry, but will we see private equity kingpins vilified all over again? Will they again be seen as barbarians instead of financial saviors? Stay tuned. - Jim