The .Plan

…minus the “highly compensated” bit.

Private-equity deals now make up about a quarter of the overall M&A market. Buyout shops paid the Street some $10 billion in fees through the first nine months of 2006 alone, according to Dealogic. Yet the buyout shops aren’t too picky about who they use. In most cases, advisory fees are just a toll paid to get access to lending.

Perhaps that’s why private-equity firms are so roundly hated by the proud types who become investment bankers.

Those bankers may just have to bear life as highly compensated and highly browbeaten.
–Dennis Berman, “Best of Times Is Worse For Investment Bankers”, Wall Street Journal, March 1, 2007

An economist breaks it down:

Professor Carroll says the super-rich can’t be accumulating the money with the intention of spending it, either, because no one could spend that much.

To see his point, take Oracle’s founder, Lawrence J. Ellison. Mr. Ellison’s net worth last year was around $16 billion. And it will probably be much bigger when the list comes out in a few weeks. With $16 billion and a 10 percent rate of return, Mr. Ellison would need to spend more than $30 million a week simply to keep from accumulating more money than he already has, to say nothing of trying to spend down the $16 billion itself.

He spent something like $100 million on his Japanese-style mansion in Woodside, Calif., making it among the more expensive private residences ever built. But that is only about three weeks worth of the interest he earns on his wealth. And a house doesn’t actually spend down his net worth because it is an asset that can be resold. At least part of the $100 million is just a different way of saving.

Mr. Ellison would have to spend that $30 million a week — $183,000 an hour — on things that can’t be resold, like parties or meals, just to avoid increasing his wealth. While somebody might be able to spend like that — Paris Hilton, maybe — it certainly wouldn’t be easy, and it can’t explain why the super-rich accumulate.
–Austan Goolsbee, “For the Super-Rich, Too Much Is Never Enough”, New York Times, March 1, 2007