Private equity firms have developed a lust for publicly-owned media companies in recent months.
Clear Channel, the largest radio chain in the country, is in the process of being taken private by a pair of Boston buyout firms, Bain Capital Partners and Thomas H. Lee Partners, in a deal roughly valued at about $19 billion. Univision, the largest Spanish language broadcaster in the country, is set to go private in another megadeal. Private equity companies have also been sniffing around Tribune Company, the huge newspaper and broadcasting conglomerate that owns the Chicago Tribune and Los Angeles Times.
All these deals raise some very troubling questions, which Columbia University Professor Eli Noam lays out in a new article in the Financial Times.
Noam notes that the typical private equity firm is ruthless in its pursuit of cash flow to meet debt payments and position the company for resale. That means wholesale cost-cutting in newsrooms and other operations.
He points out that private equity firms are not subject to the same sort of accountability and disclosure as media moguls such as News Corporation's Rupert Murdoch or Viacom's Sumner Redstone, who run publicly-traded companies where management is accountable to all shareholders and scrutinised by the public, investment analysts and the press.
"In contrast to public institutional funds, the private equity fund is limited by law and strategy to deep-pocket investors whose identities are not disclosed," he writes. "The funds keep a low profile."
How low a profile? Thomas H. Lee Partners, which was a primary player in both the Clear Channel and Univision deals, doesn't even have functioning web site.
"All this raises questions about openness, transparency and control," writes Noam. "In open societies large media holdings must be in the open. The role of media is to inform and shine light; their own structures cannot be secretive. Otherwise accountability becomes impossible, suspicions abound and the credibility of all media will suffer."
We couldn't agree more.
