Conglomerate acquirers such as GE are increasingly being supplanted by private equity firms (PE). These are characterised by more powerful performance-related incentives for the PE partners than for the executives we discussed in Chapter 2. They typically also deploy financial engineering of the sort described in Chapters 5 and 6, but with even heavier reliance on borrowing – magnifying the earnings for partners, enjoying the protection from downside risk provided by limited liability, and securing the tax privileges accorded to debt finance. Holding high levels of debt also increases the pressure on the managers of acquired firms to perform well. And, as mentioned in Chapter 6, the private equity partners typically enjoy a further tax privilege – lower (capital gains) tax rates on their profits than on other forms of income. Despite these sources of gain, external PE investors not involved in managing the funds seem to have received returns little different from those on investments in public equity markets – another example of Chapter 1’s theme of disappointing results from M&A programmes. But the promoters of the deals have on average gained considerably – one study reports 23 PE billionaires.