Locust (private equity)

Locust is derived from the German "Heuschrecke" [de.wikipedia.org: "Heuschreckendebatte" ( [http://de.wikipedia.org/wiki/Heuschreckendebatte] )] , which German politician Franz Müntefering (from the social democratic SPD party) created in the context of describing private investors, private equity funds and investment banks. The term has been popularized and is continually used in discussions critical to capitalism in Germany.

Origin

In 2004 Franz Müntefering demanded that his party take a critical position towards certain practices of private equity firms. In a speech in November 2004, he first associated private financial investors with locusts:

: "We support those companies, who act in interest of their future and in interest of their employees against irresponsible locust swarms, who measure success in quarterly intervals, suck off substance and let companies die once they have eaten them away..." [Translation from SPD: "Programmheft I. Tradition und Fortschritt." Januar 2005 ( [http://www.partei.spd.de/servlet/PB/show/1043150/221204_programmheft_1.pdf PDF] )]

This metaphor was repeated several times by both official pamphlets of the SPD and by German media. In a political context "Heuschrecke" is established, being used mostly by the left-wing political parties.

Originally, none of the companies were named specifically. However, in 2005, the online news magazine stern.de published an article with a list of companies, namely Apax, BC Partners, Carlyle Group, Advent International, Permira, Blackstone Group, CVC Capital Partners, Saban Capital Group, KKR, WCM, and Goldman Sachs. [stern.de: "Die Namen der Heuschrecken." April 2005 ( [http://stern.de/politik/deutschland/539759.html] )]

In 2005 former US Secretary of Treasury John W. Snow criticized the debate and commented "I do not think in these terms." [netzzeitung: "US-Finanzminister übt Kritik an«Heuschrecken»-Debatte", June, 2005( [http://www.netzeitung.de/spezial/geldanlage/344160.html] )] .

The stock exchange of Düsseldorf made Locust the "faux-pas word" of 2005. [Düsseldorf Stock Exchange: "Press Release", January, 2006] .

While remaining a mostly German phenomenon, "locust" has increasingly been quoted in English and American media, such as in the New York Times [New York Times: "Germany’s Blackstone Deal Swats Down ‘Locust’ Talk", April, 2004( [http://dealbook.blogs.nytimes.com/2006/04/24/germanys-blackstone-deal-swats-down-locust-talk/] )] , the International Herald Tribune [IHT: "The buzz on German private equity", October, 2006( [http://www.iht.com/articles/2006/10/20/business/wblocust.php] )] , and most recently in the FT [FTl.com: "German deputy still targets ‘locusts’", February, 2007( [http://www.ft.com/cms/s/55437712-bc4e-11db-9cbc-0000779e2340.html] )] and The Economist [The Economist: "Dial L for locust", June, 2007( [http://www.economist.com/business/displaystory.cfm?story_id=9340027] )] .

References