Private equity cheers lack of W. Street research

(For other news from the Reuters Venture Capital Summit, click here)

SAN FRANCISCO (Reuters) - A lack of Wall Street research on public companies has given private equity firms a major opportunity, Jim Davidson, a founding member of Silver Lake Partners, said on Tuesday.

Speaking at the Reuters Venture Capital Summit, Davidson said recent regulatory reforms that have separated investment banking from research effectively dried up much of the funding that paid for Wall Street analyst coverage of public companies.

This has given private equity firms like Silver Lake, which do their own research, a big edge over public markets when it comes to deciding where to invest, said Davidson, whose firm took computer disk-drive maker Seagate Technology STX.N private and then public again.

Davidson said that in the wake of a crack-down on Wall Street abuses led by New York Attorney General Eliot Spitzer, public markets have less information to work with. That gives his firm an edge.

"Thank God for Eliot Spitzer and this new framework because for people like Silver Lake we do our own research," he said.

Silver Lake, which focuses on large-scale investments in technology companies, also sees a growing number of opportunities in snapping up businesses that large conglomerates are looking to unload, Davidson said.

This is an opportunity in the technology sector in particular, where many companies have so many divisions that executives may not be spending enough time running a certain business and squeezing out its full potential, he said.

"Most, if not all, large technology conglomerates have businesses that are structurally unsustainable," he said. "Today to run a business and knowingly run it at less than world class metrics does not add any value."