When Holman Jenkins penned his now famous column on the TXU deal, even we were stunned by the depth of his cynicism. He clearly thinks the "treehugger" alarm being raised by those wondering if the environmentalists had captured the private equity firms that were buying the texas energy giant is just plain naïve. Obviously no ideological group had captured KKR or the Texas Pacific Group. They were still following the ideology they had always followed—the ideology of making as much money as possible—it just required a bit of greenery this time around. Indeed, Holman wrote that it wasn't only the environmentalists who might end up regretting making the deal—it also seemed against the interests of Texas residents and taxpayers, as well as TXU shareholders.
One wonders, for instance, what the green groups are expecting to receive, indirectly, for their endorsement? It quickly emerged that TXU already had intended to spike six of the planned coal plants. Noticed too was the fact that TXU enjoys considerable market power in Texas. What's going to stop rates from rising in the future as Texas outstrips the available power supply, especially with heavy restrictions on new coal plants? Good question. And, for TXU shareholders, don't you get the feeling that the political phalanx behind the deal is meant to deter another bidder from beating what is perhaps, under the circumstances, a lowball offer?
The only flaw that Holman saw with the private equity ploy to dress up as environmentalists was that it was so obviously phony.
Now we'll find out if these shrewd private equity operators are really any better equipped to deal with a relentlessly more politicized business environment than public companies have shown themselves to be. Once the buzz from Monday's razzle-dazzle has worn off, don't be surprised if the answer turns out to be "no."
Well, maybe Holman underestimated the genius of private equity. Today we learned that a group called Environmental Defense—who are supporters of the private equity buyout—have hired Perella Weinberg Partners to advise them on the deal. When you can convince the environmental groups to start paying investment bank advisory fees, well, that clearly means you really are equipped to deal with a politicized business environment.
So maybe the headline to this item really should be "we're all clients of investment banks now."
Update: One the other hand, DealJournal wonders if maybe representing Environmental Defense in the TXU deal is a sign that Perella Weinberg might be getting a little desperate.
Private Equity Says 'Like Us!' [Wall Street Journal]
Environmentalists hire banker for role in TXU deal [Reuters]